How do you asses the current impact of COVID-19 on the labor market in your country in terms of employment, unemployment, sectors, and firms? Who is affected the most? What do you see in terms of sectoral employment reactions, and regarding permanent, fixed-term or agency workers? Are current figures and estimates more or less in line with earlier forecasts or are there some unexpected or even surprising deviations?
Crisis Response Monitoring Country comparison
First measures to lower the spread of the virus were announced by the Austrian government on March 11, 2020 and introduced in the following week. The Austrian economy went into lockdown on March 16. The measures included a ban the opening of shops, with the exemption of shops selling food, drugs or medical supplies; restaurants could sell take-out meals. After mid-April (Easter holidays), several types of shops were allowed to re-open conditional on increased safety measures, such as the wearing of facial masks. Further restrictions were lifted at the beginning of May and in mid-May restaurants, personal service providers (such as hairdressers) and, partially, even schools re-opened, subject to specific safety measures. Over the summer, the situation largely normalized, and most pandemic measures were lifted. Restrictions applied to events and gatherings of larger numbers of people, as well as to workplaces, which limited the allowed number of persons. Since the start of autumn, however, the number of new infections has been rising and the federal government as well as regional authorities re-imposed restrictions.
The strict measures during the lockdown and the ensuing economic crisis had a dramatic impact on the labor market. The number of unemployed increased, the number of employed decreased, and there was a massive inflow into short-time work. (See Figures 1 to 3.) The number of persons who registered as unemployed with the Public Employment Services (PES) rose to a record level by the end of March and continued to rise until mid-April. Since then, the rise has been halted. At the end of April 2020, a total of 571,500 persons were registered with the PES (including persons in training), which is an increase of 210,000 persons or 58% compared to April of the previous year. While the number of persons in training was less by a quarter due to the discontinuation of training courses, the number of persons registered as unemployed was greater by about two thirds. The unemployment rate (based on persons registered with the PES, excluding persons in training) reached 12.7%. This is the largest unemployment rate for April since the early 1950s and it was only exceeded by the unemployment in the winter of 1953/54.
The rise in unemployment was mirrored by a strong decline in employment. In comparison to March and April of 2019, total employment was lower by about 5%, corresponding to a loss of 185,000 jobs. In May, however, the labor market situation improved slightly. The number of unemployed fell by almost 10% compared to April and employment rose by 1.6%. Compared to the same month in the previous year, unemployment was still up by 50% and employment down by 4%, but the downward spiral halted.
Bock-Schappelwein, Huemer, and Hyll (2020) and Bock-Schappelwein, Eppel, Huemer, Hyll, and Mahringer (2020) provide a more detailed overview of the developments until the end of April, which we summarize here. The labor market effects of the crisis were asymmetric across industries and worker groups. Most jobs losses occurred in the accommodation and food service industry, as employment in hotels and restaurants fell by almost 40%. Because of its size, this industry also recorded the largest drop in employment in absolute terms, with a loss of almost 75,000 jobs. Other industries that were hit particularly hard by the crisis include the arts, entertainment, and recreation culture; personal services; and the provision of other business services (which also includes temporary work agencies). In these industries, employment fell by 12% to 15%.
Although certain businesses in the retail industry were allowed to open from mid-April and the initial drop in employment was comparatively mild (-3%), the large size of the retail industry resulted in a sizable loss of about 17,000 jobs. The decline in the transportation and storage industry was about 13,000 jobs (-6%). In the construction industry, the decline in employment was strong in March (-10 %), but this was partially offset by the development in April when many construction sites were able to resume work. In contrast, both the health and social work sector and the information and communication technology industry recorded a rise in employment of about 3,000 jobs compared to April 2019, corresponding to an increase of 1.1% and 3.3%.
While in March men were slightly more affected by the decline in employment than women (men -5.6%, women -4.1%; Bock-Schappelwein, Famira-Mühlberger, and Mayrhuber, 2020), by the end of April the losses were almost balanced across the genders. Compared to the previous year, employment was 5.1% (about 103,000 jobs) lower for men and 4.9% (about 83,000 jobs) lower for women.
Gaps between other worker groups are much more pronounced. The number of workers with Austrian citizenship fell by 4% (114,000 workers), but for workers with foreign citizenship the job loss was more than twice as large (-9.2%, corresponding to 72,000 workers). This difference reflects the different distribution of workers across industries, the segmentation in terms of occupations and employment forms, and the fact that many cross-border commuters (particularly in the East of the country) were unable to reach their jobs due to mobility restrictions.
Blue-collar workers were disproportionately more affected by job cuts than white-collar workers. In April, the decline in employment among blue-collar workers amounted to -12.0% (compared to April 2019), while there were hardly any job losses among white-collar workers or civil servants (-0.8%). In other words, 9 out of 10 lost jobs lost were from manual workers. The strong concentration of jobs losses on blue-collar workers is partially due to their, compared to white-collar workers, weaker employment protection. The period of notice for salaried employees varies from six weeks (for less than two years of service) to five months (for 25 years or more), depending on the number of years of service, while for manual workers it is only 14 days, although this period might by extended by collective agreement. Young workers (under the age of 25) were also affected more than proportionally in terms of the employment decline, although in terms of rising unemployment the effect has been strongest among prime-age workers. (See also point 6 below.)
It is important to stress that the most important labor market measure in reaction to the crisis, the COVID-19 short-time work scheme, prevented an even steeper fall in employment. (See also point 4 below.) By early May 2020, the PES approved almost 100,000 applications from firms applying for the scheme, covering almost one third of the workforce. Figure 2 shows the impact that this measure had on employment across industries. Although these numbers do not show to what extent the short-time periods were used – firms do not need to use their approved applications – it is safe to say that the scheme prevented much greater job losses.
Depending on the industry, we see a large variation in the level of short-time utilization as well as in the combination of short-time work and labor shedding. In total, 90% of the workforce in the tourism industry were affected by the COVID-19 pandemic. In arts, entertainment, and recreation, about three quarters of workers were affected, and in manufacturing, construction, and the retail industry the share was above 50%.
With the beginning of the summer, the employment situation started to improve. In July, the employment level was 2.1% lower than in July of the previous year, while in August it was 1.1% lower (Figure 1). Unemployment has also been declining (Figure 3). In August, registered unemployment was up by one third with respect to the same month in the previous year and the number of those in training, which had dropped during the lockdown, returned almost to the level of 2019. The most recent data released by the PES indicate that this positive trend continued in September. Registered unemployment plus training were up by 75,000 persons compared to the numbers of the previous year’s September. The year-on-year comparison thus shows an increase of 22% in September, compared to a peak of 58% in April. These developments were accompanied by a steady reduction in the number of workers registered for short-time work. This number peaked in April and May, involving up to1.3 million workers, but it has been declining since then and stood at about 400,000 workers at the beginning of September. It must be noted that not all workers registered for the scheme end up working short-time, as firms can decide flexibly to what extent they want to use this instrument once their application has been approved.
Despite these overall positive trends, the labor market situation remains difficult, particularly for vulnerable groups of workers who face an increased risk of long-term unemployment and labor market exit. Moreover, the impact of the crisis continues to be asymmetric across industries (Bock-Schappelwein, Fritz, Huemer and Hyll, 2020). In addition to the accommodation services (-8.3% employed persons in August, compared to the previous year) and food services (-12.2%), there are several sectors in which lost employment due to the pandemic did not rebound. These include personal services, such as hairdressing and beauty salons; leisure and cultural services, such as libraries, museums, betting offices, theaters, and sports facilities and fitness centers; and the creative, artistic, and entertainment activities. In the arts and culture sector, large numbers of workers are self-employed and thus the loss in dependent employment reflects the decline in economic activity only incompletely. Employment losses are recorded also for temporary agency employment and other economic services (-6.7%) as well as in the large manufacturing sector, where employment in August was 1.6% lower than in August of the previous year.
Some industries – agriculture and forestry, energy and water supply, information and communication, and public services (education, health care) – were, on the other hand, able to stabilize or even expand their workforce. A remarkable development took place in the construction sector, where employment in August, compared to previous year’s August, was up by almost 6,000 workers (+2.1%). However, at the same time the number of registered unemployed from the construction sector was also up by about 6,000 workers, which corresponds to an increase of about one third.
The initial impact of the COVID-19 crisis was steep and rapid. In its first two months, March and April of 2020, Canada lost more than three million jobs from a workforce of just over 19 million. The worst months were April and May, and the bounce back was initially robust with nearly 2.4 million jobs added between May and September. However, there was a slowdown in the rate of recovery between September and October as the second wave of COVID-19 grew. Overall, as of October 2020 (the most recent data available), employment levels remain just over 635,000 workers below the February peak.
The Canadian government’s support for the labour market and the economy in general is put into perspective by an economic statement issued on November 30, 2020 by the federal government, and a July fiscal snapshot. In light of the COVID-19 crisis, the November statement projects the federal debt to gross domestic product (GDP) ratio to be just under 51% in the current fiscal year, rising to nearly 53% in 2021–22 (see section below on fiscal viability). Interestingly, the federal government indicated these recently announced measures are time-limited and bound by the health of the economy, which will be measured by, among other things, the employment rate, total hours worked and the level of unemployment.
In examining the evolution of employment and unemployment rates during the pandemic, some concerns have been raised about how comparable these recent trends are to historical norms given that the share of the employed reporting zero hours has also increased dramatically. Thomas Lemieux and colleagues report that by April 2020, a 32% decline in hours worked coincided with a 15% decline in overall employment.
COVID-19’s labour market impacts have been uneven on several dimensions, especially age, wage, sector/industry, immigration status, gender and geography, as seen in Table 1, which looks at February to October changes. The most dramatic differences are across industries, where accommodation and food services; arts, entertainment and recreation; and transportation and warehousing, were particularly hard hit whereas (for example) finance, insurance, real estate, rental and leasing were little impacted. Low wage workers (in the first 25th quartile of earnings) and those with less education were also more negatively affected in terms of employment. To some extent, this reflects the sectoral composition of employment losses, meaning that the sectors most affected by the pandemic such as accommodation and food services, tend to employ younger, lower-educated workers and the wages tend to be below the median. Each of these groups most impacted by job losses has also been slow to recover, with employment levels remaining well below their pre-crisis levels of February 2020.
Figure 1 shows the dramatic impact on young workers by contrasting the unemployment rate for three age groups. To provide perspective, on the left-hand side are the unemployment rates since 1976, and on the right is a magnified view since January 2018. The extreme unemployment rate for young workers during the COVID crisis relative to historical recessions is noteworthy. In contrast, for workers aged 25–54 and 55 and over, COVID-era unemployment rates are comparable to those experienced during previous recessions. Figure 2 similarly addresses the employment rate and again shows the relatively large decline for young workers.
Figures 3 and 4 undertake a similar exercise as Figures 1 and 2, but for females and males. As seen on the right-hand side of Figure 3, at the onset of the pandemic (April and May 2020), the female unemployment rate jumped from somewhat lower to slightly higher than that for males. This led to an initial narrative about females being harder hit, which was true. However, in the recovery starting in June 2020, the female unemployment rate declined more quickly than that for males. The uneven changes in unemployment for both females and males follow in part from the gender composition of the industries most affected by lockdowns and physical distancing requirements. Figure 4 tells a similar story about employment rates by gender, but also raises a serious concern for the future. On the left of Figure 4, we see that female employment has recovered, or at least not been permanently reduced by recent recessions, whereas male employees appear to have experienced more permanent effects from recessionary shocks. This issue requires careful attention going forward.
Although the second wave of COVID-19 has been geographically dispersed, the initial impact was concentrated, with a few major urban areas disproportionately affected. On this dimension, provincial government reactions play a role in labour market outcomes. Canada is a decentralized federation with two constitutionally recognized orders of government (not levels — neither has authority over the other): federal (national) and provincial (regional). Healthcare is almost entirely a provincial responsibility although the federal government has influence by virtue of fiscal transfers to the provinces. Most labour markets are also the responsibility of the provinces. The federal government has responsibility for a very limited set of industries including banking, interprovincial transportation and the military. This means that business restrictions, social distancing and mask wearing are the responsibility of provinces. Substantial differences in provincial policy approaches due to differing local conditions have been seen throughout the pandemic.
Despite having less formal responsibility than the provinces for labour markets, the federal government has greater fiscal capacity relative to its responsibilities and has constitutionally protected “spending power.” It runs the national Employment Insurance (EI) program (called unemployment insurance in some countries), and during the COVID-19 crisis it established a wide array of short-term and one-time benefit programs, discussed below. Almost all COVID-19 labour market–oriented direct transfers to residents and employers originated with the federal government, although a few were cost-shared with the provinces.
- “Labour Force Characteristics, Monthly, Seasonally Adjusted and Trend-Cycle, Last 5 Months,” Statistics Canada, Table 14-10-0287-01, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410028701.
- Stephen R.G. Jones, Fabian Lange, W. Craig Riddell, and Casey Warman, “Waiting for Recovery: The Canadian Labour Market in June,” Canadian Public Policy 46, no. S2 (2020): S102–S118, https://www.utpjournals.press/action/showCitFormats?doi=10.3138%2Fcpp.2020-078.
- Thomas Lemieux, Kevin Milligan, Tammy Schirle, and Mikal Skuterud, “Initial Impacts of the COVID-19 Pandemic on the Canadian Labour Market,” Canadian Public Policy 46, no. S1 (2020): S55–S65. https://www.utpjournals.press/doi/full/10.3138/cpp.2020-049.
- In contrast, municipal governments are creatures of provincial governments and represent a lower level of government over which the federal government has no direct responsibility. Canada also has three territories with very small populations; they have ties to the federal government but are treated similarly to provinces.
France started a rigorous lockdown on March, 17, 2020. Schools, restaurants and all shops except pharmacies and groceries were closed. Mobility was authorized for a limited list of motives explicitly listed by a decree released on 24 March. Those who moved were required to have an authorization from their employer or a sworn statement indicating the reason for the trip. Violation of these rules is liable to a fine from 135 euros to 3750 euros and 6 months imprisonment. The rules were stringent: The government announced 15 days after the start of containment that there had been 5.8 million checks and 350,000 fines.
The lockdown started to be released from May 11, but very gradually, with a limited reopening of schools and shops depending on sectors and regions. Restaurants and cafés remained closed until June 2 and schools until the end of June.
As a consequence of this very stringent lockdown, economic activity has slowed sharply in April. The estimate of the loss of economic activity linked to the health crisis is around 28% in April, as shown by Figure 1. However, the rebound in economic activity was very strong from the start of the deconfinement, in May and then in June. It continued, albeit at a slower pace, during the summer months. Overall, on average over the third quarter, the loss of economic activity compared with the pre-crisis level would have been around 5%.
At the same time, for several weeks and after a lull during the summer, the spread of the virus has intensified, particularly in large cities. The implementation of new measures to limit social interactions started in mid-October with a second lockdown, less stringent than the first one insofar as schools remain open and people can commute for professional reasons. The end of the year is characterized by a twofold uncertainty about the evolution of the epidemic in the coming months, and about the possible tightening of health containment measures. The annual GDP contraction forecast is -11% in the beginning of November 2020.
Thanks to a very intensive use of short-time work, which covered about half of employees at the end of April 2020, the employment drop has been limited (Figure 2). It has mainly been due to the freeze of hiring. Between the end of December 2019 and the end of June 2020, salaried employment decreased by 715,000 or -2.8%. This decline, which is unprecedented in magnitude, remains much more limited than the decline in activity (-13.8% in the second quarter after -5.9% in the first).
According to the national statistical institute (INSEE, 2020c), in the second half of the year, salaried employment would increase in the third quarter and then decrease again in the fourth. In the third quarter, the rebound would be mainly due to temporary employment. Monthly data show that the rise in temporary employment, which began in May, continued at a sustained pace in July and August (about +10 per cent per month). The resumption of hiring on fixed-term contracts is also reported to have contributed to the rebound in employment, particularly in industry, accommodation and food services, and construction (Figure 4). Public employment is also expected to increase. In the fourth quarter, salaried employment is expected to decline again, mainly in those sectors that have been lastingly affected by the crisis. This is particularly the case in transportation, accommodation and restaurant services, and household services: companies in these sectors, due to worsened business prospects and/or their financial constraints, would be less able to maintain the level of employment they had maintained until the fall.
During the period of confinement, a large number of unemployed persons had interrupted their search, leading, despite the decline in employment, to a decline in the number of unemployed persons as defined by the International Labor Office. This effect would largely fade away in the second half of the year. Thus, the unemployment rate would rise sharply in the second half of the year: it would be 9.0% in the third quarter of 2020 and reach 9.7% at the end of the year, 1.6 points higher than a year earlier (Figure 4).
- Travel between the home and the place of exercise of the professional activity, when they are essential for the exercise of activities which cannot be organized in the form of telework or professional displacements which cannot be deferred; Travel to make purchases of supplies necessary for professional activity and purchases of basic necessities in establishments whose activities remain authorized; Consultations and care that cannot be provided remotely and that cannot be deferred; Care of patients with long-term conditions; Travel for compelling family reasons, for assistance to vulnerable people or childcare; Brief trips, within the limit of one hour daily and within a maximum radius of one kilometer around the home, linked either to the individual physical activity of the people, to the exclusion of any collective sporting activity and any proximity to other people, either walking with the only people in the same home, or the needs of pets; Judicial or administrative summons; Participation in missions of general interest at the request of the administrative authority.
Forecasts on the economic impact of COVID-19 released in March 2020 had been rather optimistic, especially concerning the labor market impact (e.g., Michelsen et al. 2020a, Sachverständigenrat 2020a). However, assessments released until June 2020 were significantly more negative: For example, the federal government and the German Council of Economic Experts expected GDP to fall by 6.3 or 6.5 percent in 2020 by that time (Bundesregierung 2020a; Sachverständigenrat 2020b). Forecasts from September and October 2020, which had been released before the reinstatement of a national (partial) lockdown in early November, expect GDP to decline by up to 6 percent in 2020, but these assessments are generally again more optimistic and argue in favor of a V-shaped recession with economic recovery in 2021, involving GDP growth of 4 to 5 percent in that year (Bundesregierung 2020b; Michelsen et al. 2020b; Wollmershäuser 2020.
Table 1 displays selected statistics for the labor market impact of COVID-19 until October 2020 (currently the most recent available data). In that month, the number of registered unemployed stood at 2.75 million persons, an increase by 25 percent compared to October 2019. A decomposition exercise shows that about a quarter of the COVID-19 impact on unemployment is due to relatively fewer underemployed persons (e.g., as active labor market policy measures have been substantially reduced, individuals who would have otherwise been excluded from official statistics are now counted as registered unemployed), an additional quarter is due to increased layoffs, and about one fifth is due to reduced hiring activities (BA 2020a). Employment in Germany, however, has not declined significantly yet; and it appears as if the COVID-19-induced rise in unemployment has been stopped for the time being – there has been practically no additional COVID-19 impact on unemployment since July 2020.
However, short-time work (STW) is still extensively used in Germany, and the future employment perspectives of these short-time workers are – at least to a certain extent – unclear. Figure 1 shows that following a peak in April 2020, when the number of short-time workers reached almost 6 million, their number still stood at 5.9 million in May 2020, but decreased to about 2.6 million until August 2020. This also means that STW in the current crisis has reached significantly higher levels than during the Great Recession where the peak was at about 1.5 million short-time workers (Brenke et al. 2013). Although these numbers still involve a larger degree of uncertainty, are only reported with substantial time lag and may be subject to revisions, also the most recently available updates and forecasts indicate a continuous decline (ifo 2020a), implying that the share of short-time workers among all employees that are subject to social security contributions fell from a peak of 20 percent in April 2020 to about 10 percent in October 2020.
Business confidence stood at a historical low in April 2020. It has been increasing since then until September 2020, when it slightly dropped again in October 2020 (ifo 2020b, ifo 2020c). Yet, unemployment figures not only increased because of increased layoffs, but to a similar extent also because of firms’ reduced hiring activities, resulting in fewer exits from unemployment (Bauer and Weber 2020). The demand for new workers had literally collapsed, especially in April and May 2020, when the number of vacancies declined sharply (BA 2020a; Bossler et al. 2020). Compared to one year before, the stock of posted vacancies is still more than 20 percent lower in October 2020 (Table 1). Labor demand is thus low, but it has stabilized for the time being.
Unemployment risks are particular high in some sectors, including hotels and restaurants, retail, various other service sectors, and to some extent even health and logistics (BA 2020a). These sectors have been either directly affected by restrictions on economic activities and social contacts, or indirectly via disrupted value chains, or simply by a sharp drop in demand. However, quite a few sectors in the German economy remain relatively unaffected (e.g., the public sector, the finance sector, education, and agriculture; BA 2020a). In terms of most vulnerable groups, employment losses can be expected to be particularly concentrated among workers with fixed-term contracts, temporary agency workers, marginal part-time workers, self-employed and freelancers. For example, one in four solo self-employed workers considers it very likely they will have to give up their own solo self-employment within the next twelve months (Bertschek and Erdsiek 2020). The crisis also poses an additional challenge for the labor market integration of the recent cohort of humanitarian migrants that arrived in Germany after 2015.
Firms with liquidity problems already before the current crisis are at a high risk of bankruptcy. This risk may be particularly concentrated among SMEs with severely restricted economic activities, such as restaurants, small retail shops, and travel agencies. But it appears too early for an assessment: Due to changes in insolvency law, the precise extent to which these firms will ultimately go out of business will only become apparent in early 2021.
From the current perspective, a scenario therefore appears plausible – also when considering other factors and ongoing developments – in which the number of unemployed in Germany continues to rise towards 3.5 million by spring 2021 (starting from 2.75 million in October 2020). The volume of STW is likely to decline further in the course of 2020, but may still correspond to around two million employees by the end of 2020. However, this figure could only gradually decline in the course of 2021 because the maximum period during which STW compensations are paid has been extended to 24 months. Hence, also an increase of hidden unemployment can be expected (on the one hand due to STW, on the other hand due to increased withdrawal from the labor market).
- Such revisions already happened. For example, the number of short-time workers in May 2020 has been revised from 6.7 million to 5.9 million, and later to 5.7 million (BA 2020b, 2020c, 2020h).
- The obligation to file for insolvency had initially been suspended until September 30, 2020 for firms which are suffering economic difficulties or have become illiquid because of COVID-19 (under specific conditions, see KPMG Global 2020 for details). This suspension will be extended until December 31, 2020 (the legislative process is currently ongoing).
In March 2020, Italy’s industrial production fell almost 30% and GDP contracted 4.7% as a consequence of the lockdown measures. In April 2020, Italy hit a new record low for industrial production, which contracted by 19.1% relative to March. However, the effects of the lockdown on employment levels have not yet manifested; the cushion provided by social safety nets and the suspension of the layoffs have limited the short-term effects of COVID-19 on the labor market. At the end of March 2020, the National Institute of Statistics (ISTAT) registered a decrease in the unemployment rate relative to March 2019, i.e. -11.1%, while the employment rate only decreased by 0.1%. The decline in unemployment continued in April, reaching the lowest figure since 2007; this however reflected a considerable increase in the number of economically inactive people, as shown by the figure below. At the same time, the employment rate in April only decreased by 1.2% with respect to March 2020. Since July 2020, employment has started growing at a constant rate (+0.4% on a monthly basis). However, employment levels in August 2020 are still 1.8% lower than the ones registered in August 2019. The drop in the number of employed is largely due to fixed term contracts not being renewed. Figure 1 further shows that the unemployment rate has increased since June 2020; this is mainly driven by the decline of the number of inactive workers in the third quarter of 2020 (-4.1% relative to Q2 2020).
Italy has adopted sectoral lockdown measures to contain the spread of COVID-19: the government decided to shut down non-essential businesses, involving almost 8 million employed people. Workers employed in financial, banking and insurance sectors, as well as in public administration and professional services could continue their activity from home. On the contrary, workers employed in manufacturing, construction, tourism and retail suffered the most (Barbieri et al. 2020). In April 2020, the Italian Social Security Administration (INPS) registered an increase in the requests for subsidies for temporary reductions of hours worked (i.e. Cassa Integrazione Guadagni) of about 2,953% with respect to April 2019. ISTAT estimated that in the second quarter of 2020 hours worked decreased by about 20% with respect to the 2019. Further, the Italian GDP has registered a quarter-over- quarter decline of 12.8%.
The latest data from Statistics Netherlands shows a partial recovery after an initial substantial drop in employed persons (Figure 1 left). During the first wave, the reduction was limited to -17 thousand persons in March, then increased to -160 thousand persons in April, and dropped back to -24 thousand persons in May. After the gradual lifting of restrictive measures, the number of employed persons recovered partially in June (+45 thousand persons) and in July and August (both +4 thousand persons). Since the start of the second wave, the number of employed persons first dropped by 3 thousand persons in September, followed by a somewhat surprising increase of 40 thousand persons in October. So far the crisis has led to a cumulative reduction of -111 thousand persons since the start of COVID-19 pandemic (-1.2%), particularly among workers with a fixed-term contract (Figure 1 right).
Until May, the increase in unemployment was moderate, up to 56 thousand persons between February and May, due in part to a reduction in the labor force participation rate, from 71.4% in February to 70.2% in May. By now, though, the labor force participation rate has almost fully recovered (71.3%) and the number of unemployed persons has increased substantially: from 274 thousand persons in February to 406 thousand in October (+48%).
The large drop in employed persons during April and May was preceded by an unprecedented drop in hours worked per week, which we already observed in March. After the lockdown mid-March, hours worked per week dropped by 12% (-4 hours), and dropped a little further by 2% in April (-0.7 hours) (Figure 2 left). In May the number of hours worked continued to fall by another 4% (-1.3 hour). The drop in the total number of hours worked was especially large in private services (Figure 2 right). After the first wave, we saw a slight recovery in hours worked equal to 3% in June (1 hour). This is no coincidence because June marked the beginning of some substantial alleviations of the lockdown. The number of hours worked remained at approximately the same level in September. The figures also show a substantial return of working from home towards working at the workplace. The Dutch government therefore made an urgent appeal to everyone to work from home as much as possible at the beginning of October.
- For other labor market developments in the Netherlands, see CPB (2020a) and CPB (2020b).
- The unemployment rate increased from 2.9% in February to 4.3% in October. In between, the unemployment rate peaked at 4.6% in August.
- The figures in the left panel of Figure 2 are slightly different from the September country report. This is because the sample of persons who completed the survey for the months March-September is somewhat different from the sample of persons who completed the survey for the months March-June.
- No survey was conducted for the months July and August.
Between March and May 2020
Portugal declared the State of Emergency over coronavirus on March 18. According to data provided by the Portuguese Institute of Employment and Professional Training (IEFP, 2020), in May (March) 2020 the number of registered unemployed in mainland Portugal increased by 4.2% (9.6%) comparing to April (February) and by 36.2% (3.7%) comparing to May (March) 2019. This increase is mainly due to the increase of registered short-term unemployed (less than 12 months). Amongst the registered unemployed in May, 45% were males and 55% females. However, despite the greater share of females in the group of unemployed, the observed increase between May 2020 and May 2019 was larger for males (39.5%) than for females (33.7%).
Workers without a higher education degree were the most affected at this initial stage of the crisis, for whom we observe an average increase in registered unemployment of 38.3% between May 2020 and May 2019 – which contrasts with an increase of 22.8% for workers with a university degree. There are no significant differences by gender across levels of educational attainment.
Considering occupations, the worst hit groups were: Plant and machine operators and assemblers (62% increase comparing to May 2019); Sales and services workers (50% increase); Craft and related trades workers (42% increase); and Clerks (36% increase).
Unemployment increased by 10% between February and March 2020 in the three main sectors of economic activity. This initial situation changed during May 2020 (full month in lockdown). Compared to May 2019 the number of registered unemployed increased by 13.5% in the primary sector, by 27.8% in the secondary sector, and by 44.7% in the tertiary sector. These averages, however, hide great differences across the activities that compose the sectors. For example, within the manufacturing sector the worst hit activities were: Motor vehicles (45.9% increase, comparing to May 2019); Manufacture of basic metals and of fabricated metal products (45.4% increase); Textile, clothing and leather industries (43% increase); and Petroleum, chemical and rubber manufacturing (34.5% increase). Amongst the services sector the worst hit activities were: Lodging, restaurants and hotels (89.3% increase compared to May 2019); Transports and storage (62.8% increase) and Real estate (57.5% increase). Furthermore, the number of job offers fell by 39% when comparing May 2020 to May 2019 (although the number of job offers increased between April and May 2020 by 5%). Which makes finding a new job a difficult task for existing and newly unemployed as well as for labour market entrants. In Table 1 we provide a summary of the labour market impacts of this crisis in Portugal.
Between June and September 2020
Regarding Panel B of Table 1, in September 2020 the number of registered unemployed in mainland Portugal increased by 0.1% comparing to August and by 37.4% comparing to September 2019. This increase is mainly due to the increase of registered short-term unemployed (55.7% compared to September 2019). However, while in May homologous variation in long-term unemployment was nearly zero, the same variation in September was just over 13%. This confirms that as the labour market stagnates long-term unemployment may become more prevalent.
Workers without a higher education degree continue to be the most affected by the crisis. In particular, in September 2020 university graduates accounted for 15% of the stock in unemployment, and workers High School (ISCED 3) represented the largest share of registered unemployed (32%).
In September 2020, the distribution of unemployment across the three main sectors of economic activity was as follows: 73% in the tertiary sector, 21% in secondary sector and 3.8% in the primary sector. Yet again, these averages conceal differences across the activities that compose the sectors. Workers from activities related to Real estate, administrative work and support services account for 29% of total unemployment; those coming from services related to Lodging, restaurants and hotels and Gross and retail trade account for another 22% of total unemployment (11% each). In the secondary sector, the most relevant groups are: Construction (6.2% of total unemployment) and Textile, clothing and leather industries (4.3%).
The State of Emergency was replaced by a State of Calamity on May the 3rd. However, despite expectations and incentives for the economy to parsimoniously get back to business, labour market conditions continued to deteriorate during May, albeit at a slower rate. On May 27th 1,332,114 workers worked in firms that implemented partial or full-time layoff (which contrasts with only 72,507 on March 31st), more than half of these workers worked in Manufacturing, Gross and retail trade, and Restaurants and hotels (MTSSS, 2020). Therefore, the effort to make is to prevent these laid-off workers from being made redundant and dismissed permanently. Otherwise, unemployment is likely to increase in the medium term (not immediately because of the ban on dismissals associated with the layoff regulations) because of large-scale redundancies (see Figure 1). The State of Calamity continued through June 2020 and was replaced by a State of Alert which remained in place between July and mid-September in most of the country. On September 15 the Government declared a State of Contingency – which is still ongoing. In the last three months the number of workers in layoff remained high, nearly 1.4 million workers and just over 115 thousand firms were covered by the layoff scheme (see Figure 1). This may help explain why the unemployment rate has not soared (see Figure 2).
We do not have information on the type of contract of employment of newly unemployed workers. However, it is likely that firms will adjust their employment levels by dismissing the least permanent workers first. In fact, most of the extraordinary and temporary measures aimed at tackling this crisis (e.g. the simplified layoff scheme and the credit lines for firms) require that firms do not dismiss permanent workers and that they do not proceed with collective dismissals for some time (for 60 days after the layoff ends, and until December 2020 for those who take up credit lines). Self-employed workers account for 12% of total employment (14% male and 9% female), and 5% were business owners in 2019. We expect this crisis to have a significant impact on the activity and earnings of these workers. The SURE program by the EC may be an essential tool to help this group of workers.
- Slovakia, a country of 5.4 million inhabitants, recorded its first COVID-19 case on March 6, 2020, and its first death attributed to the pandemic on April 1, 2020. As of June 25, 2020, Slovakia had recorded 1,630 cases, 28 deaths, and had 150 active cases. In terms of the number of COVID-19 deaths Slovakia occupied the last place among European states
- This remarkable performance in terms of containing the first wave of the pandemic has been due to several key factors:
- Quick response – within less than a week since the first case schools and universities in Bratislava had been closed, border controls and mandatory quarantine for people returning from abroad had been introduced and non-essential shops had been closed; within ten days schools had been closed in the whole country, mandatory face masks had been introduced, and international bus, train, and air passenger services had been banned.
- The high level of compliance of the general public, supported by the example of politicians, news anchors, and media personalities, all wearing facemasks on the screen.
- Even though several mistakes have been made, the overall effectiveness of the measures taken was good.
- The numbers of daily new cases started to pick up already in July 2020, and on August 21 (123 new cases) it surpassed the maximum from April 16 (114 new cases). The psychological threshold of 1,000 daily cases was surpassed on October 8, 2,000 on October 16, and 3,000 on October 25, 2020. As of November 1, the second wave of the COVID-19 pandemic is in full swing in Slovakia. In response, as the first country in the world, in late October and early November Slovakia is testing its entire population (excluding minors below 10 years of age) using antibody tests.
- The overall economic impact of the COVID-19 pandemic in Slovakia in Q1 and Q2 2020 has been severe. Primarily due to meager foreign demand, in Q1 and Q2 2020 Slovak GDP shrank by 3.9% and 12.1% y-o-y, respectively, which were slightly larger drops than the Euro Area averages. Slovakia was still able to borrow record-high 4 billion EUR for 5 and 12 years at very solid rates (reoffer yield 0.35% for 5-yr bonds, 1.056% for 12-yr bonds); Fitch downgraded Slovakia from A+ to A on May 8, 2020, nevertheless.
- Given the strong growth in the Euro Area in Q3, 2020, a strong recovery can be expected in that quarter in Slovakia as well.
- Following a slight increase of the registered unemployment rate from 6.13% in February to 6.21% in March 2020, April 2020 marked a record-high monthly increase of the unemployment rate by 1.22 pp to 6.57% followed by further increase by 0.63 pp to 7.2% in May as reported by the Central Office of Labor, Social Affairs and Family (COLSAF) The unemployment rate however remains relatively low, compared to Slovakia’s historical data, when the unemployment rate reached about 15% just seven years ago.
- The unemployment rate peaked in July 2020, at 7.65%. Since then, it declined to 7.43% in September 2020.
- Remarkably and surprisingly, whereas employers announced 2,242 mass layoffs in March 2020 and the number increased to 3,142 in April, May witnessed just 1116 mass layoff announcements. Another positive signal from the labor market was that in May 9,665 people registered as unemployed found jobs, which was by 3,744 (63%) people more than in April. The labor market strengthened by September 2020, when 21,988 registered unemployed found jobs.
- While there were 180,756 unemployed in April and 198,256 in May 2020, COLSAF also registered 67,950 thousand vacancies in May 2020 (92,106 in May 2019), circa 4 thousand less than in April. Workers were sought especially for the positions of machine operators and specialized crafts people, and unqualified workers The labor market improved by September 2020, when COLSAF reported 76,673 thousand vacancies (97,589 in September 2019).
- Temporary agency workers and workers on fixed term contracts belong to some of the most affected groups in the labor market. Temporary agency workers are covered by the Labour Code provisions similar to regular employees and their employer (the agency) is obliged to offer at least 60% of the wage compensation if the employer cannot provide work to the temporary agency worker. The reference wage is equal to the average wage registered at the agency for the last 12 months. Data about actual layoffs of temporary agency workers is not available, but we expect that they are exposed to lay-offs more often than regular employees.
- Another vulnerable group, which is poorly protected against job loss are workers working on work agreements outside of the regular employment contract. There are two types of such agreements: (1) work agreements equivalent of part-time employment contracts and (2) work agreements for the maximum of 300 hours per year. Even if in the majority of cases employees with such work agreements are part of the social insurance system, employers are not obliged to compensate for their wages if they do not have the work for them. To compensate these workers, in mid-April the government announced that those who have a valid work agreement but cannot perform their work are entitled to a monthly subsidy of 210 EUR provided by the state as a compensation for the wage loss.
- KOZ statement before the tripartite meeting on May 18th, 2020: https://hsr.rokovania.sk/2020-/
- Slovak Labour Code distinguish between fixed term contract which is regular employment contract but set on specific time period and work agreement contract, which is designated for smaller jobs (up to 20 hours per week, maximum 1 year, or for maximum 300 hours per year). While the first type establish similar employment protection as the regular open-ended employment contract (e.g. severance payment if work contract ends before the set date) in the case of work agreement, employment protection is lower, with no severance payment and only a 15-day dismissal period.
Spain is one of the countries that was hit hardest by COVID-19 during the first half of 2020. The magnitude of the health crisis also explains why the lockdown was stricter and longer than in other European countries with notable exceptions such as Italy and France. Due to the positive evolution of the pandemic, several restrictions were relaxed between May and July, but the change in the trend in new COVID-19 cases made necessary to reintroduce some of them during the summer. Figure 1 shows the evolution of the Government Stringency Index for Spain computed by the Oxford Coronavirus Government Response Tracker (OxCGRT). This index is a composite measure of nine of the response metrics: school closures; workplace closures; cancellation of public events; restrictions on public gatherings; closures of public transport; stay-at-home requirements; public information campaigns; restrictions on internal movements; and international travel controls. The index on any given day is calculated as the mean score of the nine metrics, each taking a value between 0 and 100. A higher score indicates a stricter government response (i.e. 100 = strictest response). As we can see from this figure, in mid-March the Spanish government started to adopt measures to fight against the pandemics. These measures became stricter at the end of the month with a full lockdown (except for essential activities) for two weeks, although several restrictions are still in place. Table 1 presents the chronology and a brief summary of the adopted measures in this context, that are now being relaxed although several restrictions are still in force. As also shown in Figure 1, measures were effective during the first half of 2020 as it was possible to flatten the curve and to significantly reduce the number of new COVID-19 cases. However, as previously mentioned, the situation has dramatically changed in recent months in terms of contagions achieving new records during September, while the number of deaths has not followed the same path (probably due to the medical knowledge acquired during the first half of the year and improved capacity and technical equipment in the public health system). The dramatic increase in the number of new positive cases has required the adoption of new restrictive measures at the beginning of October, particularly in highly dense urban areas with high levels of contagions.
Recent forecasts for the Spanish economy by the Bank of Spain expect GDP to contract by 10-13 percent during 2020 due to the negative impact on activity of COVID19, while the recovery of economic activity during 2021 will be less intense than initially expected. Employment would decrease less than GDP (thanks to the adoption of short-time work schemes, ERTEs) while unemployment rate would go up from the 14% at the end of 2019 to 19%-22% depending on whether an early or gradual recovery is expected compared to a more risky scenario.
Taking into account the chronology of the restrictive measures adopted in Spain, Labour Force Survey data for the first and second quarter of 2020 is not very helpful to assess the potential recovery in the labour market due to the reactivation of most activities. LFS data shows that during the first quarter of 2020 some firms anticipated the negative shock in activity and decided to decrease employment levels by reducing temporary workers. Figure 2 shows a decrease of -2.2% in temporary employment in the first quarter of 2020 compared to the first quarter of 2019, but the fall in temporary jobs was much more intense during the second quarter of 2020 with a decrease of -21,1% representing more than 900,000 jobs.As it is well known, the proportion of temporary employees in Spain is above 25% and it is much higher than in other European countries (EU average is around 14%).
Table 2 presents an estimate of the direct impact on employment of the full lockdown adopted between March 28th and April 12th. During this period, one third of workers was only allowed to telework. A recent report by the Bank of Spain has estimated that in 2019 only an 8.4% of total workers worked from home regularly or occasionally. Although this proportion could have increased during this period, it seems reasonable to assume that in most cases the activity was stopped due to the full lockdown, and only partially recovered during the partial recovery of activity between May and June.
As shown in Figure 3, data for GDP for the first quarter of 2020 compared to the same period of the previous year shows a decrease in -4.1% for the first quarter of 2020 and -21.5% for the second quarter (after adjusting for calendar and seasonal effects). According to Eurostat , seasonally adjusted GDP decreased by 3.2% during the first quarter of 2020 and by 15% during the second in the euro area and by 2.6% and 14.4% in the European Union compared with the same quarter in the previous year, respectively. The size of the shock on activity during the first half of 2020 has been much more intense in Spain than in most European countries.
Available information from Social Security records allows to analyze the monthly evolution of registered employment until September 2020. The year-on-year changes in the number of employees and self-employed is shown in Figure 4 while Figure 5 shows the same information distinguishing between permanent and temporary workers. As we can see, all groups experience an unprecedented decrease in April, although in the case of temporary employment, data for March were also significantly lower than in the previous month, probably due to anticipation effects. During May and June, employment experienced substantial changes compared to the previous year, but the trend has clearly reverted, although 2019 levels have not been achieved yet (except for permanent workers that have been covered by short-term work schemes during the whole period). Looking at the figures, we can clearly see that temporary employment is much more volatile than permanent one along the business cycle and that the values for the latest available observation shows an important stabilization and recovery compared to previous months. As we can also see in Table 3, total employment measured as monthly averages did not fall substantially in March 2020 compared to March 2019 (-0.2%), but it felt a 4.0% in April compared to the same month of the previous year. This variation was mainly explained by the huge drop in temporary employment: -6.9% in March, -18.0% in April and -19.2% in May compared to the same months of the previous year. According to latest data corresponding to September 2020, overall employment is still 2.3% below September 2019, while temporary employment is -10.5% than it was in the same month of the previous year. However, the trend has clearly reverted as nearly all productive activities have been reactivated during the third quarter of the year. However, it is also important to mention that there are relevant variations in the size of the shock on employment associated to the regional sectoral specialization, but also due to the fact that some regions were allowed to restart economic activity before the others based on pandemics-related indicators.
Figure 6 shows the evolution of the daily number of total registered employment. We can see how since the beginning of April, the trend in employment destruction has clearly changed, although the speed of recovery has not accelerated during the summer and, as previously mentioned, it has slighligh slowered during August.
Figure 7 compares the evolution of the Stringency Index with daily electricity demand showing a clear association between economic activity and the different phases of the pandemics and policies adopted to fight against it.
Figure 8 shows the evolution of registered unemployment using administrative data from Public Employment Services records. Registered unemployment increased by 21.1% in April 2020 by 25.3% in May and by 28.1% in June compared to the same month of the previous year (data for the last day of the month), reaching more than 3.8 million with an increase of 847 thousand individuals compared to June 2019. The increase has affected all sectors with a similar intensity. Since then, unemployment has increased when compared to the same month of the previous year, but the trend has clearly changed and between June and September the number of registered unemployed has reduced in nearly 90 thousand individuals.
However, as previously mentioned, it is important to highlight that unemployment has not increased to a higher extent due to the flexibility introduced in temporary employment adjustment schemes (ERTEs – Expedientes de Regulación Temporal de Empleo). In fact, the government affirmed that all dismissals caused by the coronavirus will be considered unjustified, thus increasing their cost. This measure is new in the context of the Spanish labor market as in previous crisis, external flexibility mechanisms were in place instead of internal ones such as temporary lay-offs.
As shown in Table 4, the number of workers covered by ERTEs at the beginning of May were 3.3 million representing a 20% of registered employment in all sectors. However, these shares vary substantially across sectors with values above 50% for activities related to tourism and leisure activities. Similar measures were adopted for self-employed workers with more than 1.5 million being covered. If we sum all workers affected by these measures together with unemployed ones, the total number of persons affected by the economic downturn in Spain due to COVID-19 could have reached more than 8 million during April.
Figure 9 shows the evolution of the number of employees and self-employed workers covered by short-term work schemes (ERTEs and extraordinary subsidy for self-employed) during the second and third quarter of 2020. As we can see from the figure, in May 2020 the number of workers covered by these schemes arrived to 4.5 million (including employees and self-employed). In June, this figure already reduced in a -25% and in July in a -42%, but the reduction has not been so intense during August and September. On September 30th there were still 2.2 million workers covered by short-term work schemes (around half of workers covered in May). A report by the Spanish Ministry of Labour shows that by mid-June, more than 90% of workers covered by ERTEs had come back to their jobsalthough it is important to recognize that the evolution of self-employed has not been so positive. Moreover, and due to the fact that the evolution of the pandemic has worsened, and new restriction measures have been adopted, it is difficult to assess if the labor market situation will keep improving during Autumn.
- Anghel, B., Cozzolino, M., Lacuesta, A. (2020), El teletrabajo en España, Artículos Analíticos, Boletín Económico 2/2020.
The first case of Covid-19 was confirmed by the Swedish Public Health Agency on January 31 in a traveler from China and a few weeks thereafter, during the second week of March, community spread was confirmed. As a response, various restrictions were imposed with the aim of slowing down the spread (or “flattening the curve”). These restrictions have been relatively mild compared to other European countries. The measures primarily rely on voluntary compliance with recommendations from the Public Health Agency regarding social distancing. During the second week of March (week 11), the Public Health Agency made several formal announcements, requiring all residents to keep a distance from each other, that high schools and universities must move their teaching online, and that workers should work remotely to the extent possible. All workers should remain at home if they have any symptoms traditionally associated with the flu or the common cold. Unnecessary travel within the country should be avoided. Gatherings were limited to 500 people; a restriction that was further tightened to 50 two weeks later. Compulsory schools (until age 15-16) have remained open and parents are obliged by law to ensure that children without symptoms attend school. Pre-schools (before age 6) also remain open but these are not covered by school attendance laws. Outdoors movement is unrestricted and encouraged for all groups as long as proper distance can be maintained. All shops and businesses can remain open but they need to ensure proper distance between customers and all employers are required to take measures that help protect their workers.
The Swedish restrictions and recommendations were designed to be durable over an extended period of time. As a consequence, there have been few changes in the restrictions over time. Recommendations against domestic travels were, however, removed in early June. High schools and universities were allowed to open for on-site teaching at the start of the fall semesters. But teaching at universities appears to remain online in many cases, in particular in metropolitan areas were students need to travel to classes with public transport.
Some descriptive indicators of the timeline of the spread of the Covid-19 virus in Sweden are collected in figure 1. With the well-known caveats associated with each such indicator, they jointly suggest a rapid spread with many new severe cases around weeks 11 to 14 followed by a levelling out and a gradual fall in new severe cases starting between week 15 and 17 depending on indicator. Starting mid-September (around week 38), there is a gradual but steady increase in the number of reported cases.
The Swedish response has been highlighted as an exception due to its comparative leniency. The response has spurred international criticisms in media and elsewhere. But the response has also been perceived as a possible route forward for other countries. The WHO (on April 20) described the Swedish response as a possible future “model” for other societies when opening up from their current lockdown policies. It may therefore be of particular interest for other countries to assess the labor market effects of the Swedish response.
In this context, it may be important to note that the Swedish response was never motivated by economic concerns per se. The response has been coordinated by the Public Health Agency with very little interference from the political sphere (or economists). The agency motivates its route by a desire to avoid negative side effects on physical and mental health from reduced mobility and isolation, and a desire to impose a regime that can be sustained for a prolonged period of time with a fully functional health-care system. The agency has firmly stated that “heard immunity” is not a policy target and that the overall aims of the policies are similar to those of other countries. At the same time, the agency considers it impossible to prevent the disease from spreading in the long term without heard immunity or vaccination.
Overall, the Swedish Covid-19 response, as interpreted through an economic lens, mostly differs from other countries in terms of degree rather than content (with the exception of the open schools). The “recommendations” are more binding than the word may suggest as residents and firms are expected to abide by them. It is obvious that the recommendations had a massive impact on people’s behavior early on. The recommendations therefore had a sharp effect on economic outcomes. Sales in restaurants dropped by 70 percent from the second week of March and sales of apparel fell by about 50 percent during the same weeks. Over time, there has been a very clear gradual reduction in the adherence to the restrictions and an increase in mobility (as we display below). As a consequence, the consumption of goods and services in some sectors that were hit hard initially has gradually started to recover. It appears as if the opening of the Swedish economy has been more gradual and “organic” than in other countries where the removal of specific temporary laws and restrictions appear to have been more instrumental.
Sweden has a total population of 10 million, whereof 7.5 million are in working age (15-74). In 2019, the labor force participation rate (73 percent) and employment rate (68 percent) were both high by international standards. The gender employment gap (4 percentage points) is also small. The unemployment rate (6.8 percent) was close to the European aver- age. Unemployment is to a large extent concentrated among low-skilled workers, recently immigrated workers, and students. The GDP-gap in 2019 was small but positive (0.5 per- cent). Unemployment increased slightly between early 2019 and early 2020. The country has its own currency and a floating exchange rate. Exports are nearly 50 percent of GDP. Public finances are sound with a relatively low level of public debt (Maastricht debt is 35 percent of GDP).
To study the immediate impact on the labor market we primarily rely on data from the Public Employment Service (PES) on workers who are registered as unemployed. In light of the comparatively mild nature of Swedish Covid-19 restrictions, it is remarkable how stark the early labor market impact was. This is, most likely, a consequence of high early rates of compliance with the public recommendations. Figure 2 documents a rapid deterioration in labor market conditions as measured by registered unemployment, reduced vacancy postings, increased layoff notices and bankruptcies. We show how these measures evolved before and during the initial phase of the crisis. In all graphs, except for the stock of unemployed, we display the accumulated flows. For comparison, we provide corresponding numbers for 2019.
The figures suggest a substantial slow-down of the Swedish labor market, primarily in the early phase of the crisis: The number of workers registered as unemployed at the PES increased by more than 100,000 people in just 3 months and the increasing trend clearly continues. During 2019, the number of registered unemployed fell by around 14,000 during the same season. The increase in registered unemployed corresponds to about 1 percent of the labor force. As is apparent, the effect is mainly driven by the inflow into registered unemployment, even though the outflow is reduced as well.
The number of new vacancies at the PES dropped by 1/3 and the number of layoff notices increased sharply from 24,000 to 84,000 compared to the same period in 2019, thus suggesting that around 1 percent of the labor force has been notified of a layoff because of the crisis. There is also a rapid relative increase in the number of workers affected by bankruptcies, although these events affect much fewer workers.
Note that there is a possible element of double-counting across indicators since redundancy notices also include bankruptcies, and an unknown fraction of workers from bankruptcies may have ended up in registered unemployment. Due to relatively long (2-6 months) advance notice periods, most of the workers affected by a layoff notice are, however, not in the unemployment statistics yet, and most workers who receive a notice do not end up in unemployment at all.
Panel B of Table suggests that the labor market has recovered slightly since the spring although numbers are still well below 2019-levels. The rebound is particularly strong in terms of job-finding rates of the unemployed. The gap in accumulated layoffs and bankruptcies has remained almost constant after the initial shock. At the same time, we see that the inflow of new vacancies to the Swedish Public Employment Service continues to decrease. By September, the accumulated number of vacancies is 42 percent lower than in 2019. One possible explanation for the full set of results is that the crisis has resulted in a more positively selected pool of unemployed workers, which could result in higher share of posted vacancies being filled.
- Compliance with the “recommendations” have been particularly high on public holidays. Travel out of Stockholm was very limited across Easter, and parks were completely empty during April 30th (“Walpurgis”) when students traditionally celebrate the arrival of spring in public parks.
- See https://www.caspeco.se/ and www.svenskhandel.se.
- All numbers pertain to 2019. Labor market statistics and export share are taken from Statistics Sweden. Debt statistics are from the OECD. GDP-gap is from the National Institute for Economic Research.
- The total number of ”registered as unemployed” usually align well with the number of unemployed in the Labor Force Surveys although the workers are not always the same. In particular, unemployed students rarely register as unemployed and participants in some labor market programs may not actively search for jobs and thus not show up as unemployed according to the LFS.
- The size of the labor force in May 2019 was 5.5 million according to the Labor Force Surveys
- Slightly more than half of advance notices from the spring 2020 resulted in layoffs and one quarter became unemployed at some point. The share ending up in unemployment is marginally higher than during the financial crisis. Unemployment after a notice is most prevalent in the hardest hit sectors of restaurants and hotels. The assessment is also somewhat complicated by the fact that layoff notices to the Public Employment Service only are required when firms lay off at least 5 workers, and the impact of the current crisis appears to be concentrated in sectors where there are many small firms.
According to the last official labor market statistics, the unemployment rate (registered unemployed) rose from 2.5% by end of February to a peak of 3.4% by end of May and stabilized since then on a level of 3.2%. By end of October, registered unemployment is thus 46.6% higher than in October a year ago [SECO 2020a,f]. The unemployment rate according to the ILO definition amounts to 5.3% in Q3-2020, as compared to 4.6% in Q3-2019 [BFS 2020b]. Larger immediate increases have been prevented by the extensive use of the short-time work scheme (see below). However, I expect that unemployment will further increase in the first part of 2021, due to the ongoing negative impacts of the subsequent waves of the pandemic which substantially increases the risk of bankruptcies and layoffs particularly in heavily affected industries like gastronomy, hospitality/tourism and entertainment.
The longer lock-down period during the first wave and its follow-up consequences created a substantial drop in the hours worked in the Swiss labor market. In Q2-2020, the effective weekly working hours were reduced by 9.5% compared to Q2-2020. Main drivers of this large slump were gastronomy and hospitality (-54.1%), entertainment and some personal services (-23.0%) and trade and repairs (-16.8%) [BFS 2020c]. By Q3-2020, the effective working hours drop improved to -2.7% compared to the respective last year’s quarter [BFS 2020b].
The amount of job vacancies has plummeted substantively. Within two weeks after the launch of the Covid emergency measures and lock-down (March 16th), the number of vacancies posted on job boards have decreased by 26% [Adecco Group Swiss Job Market Index/Stellenmarkt-Monitor University of Zurich]. The newly published vacancies initially fell by 45%. In May, the situation slightly recovered, but the amount of new job ads located still 30% below the comparable pre-year period [Novalytica/x28 2020a]. In the following months, recovery continued until August where the level of newly published job ads was 15% below pre-year. However, the last measurements by mid of November show that the catch-up stopped and the level of new job ads is at -18% compared to the pre-year period [Novalytica/x28 2020b]. Figure 1 shows in the left panel the weekly evolution of newly published vacancies in conjunction with the lock-down and re-opening steps. This evolution implies that, by end of May, the total number of posted vacancies (by firms and recruiters) was down to a level of approximately 130K, whereas it has been at 210K in the middle of Q1-2020 [jobradar.ch]. This massive reduction in labor demand did diminish but clearly not fully recover so far, as the right panel shows. This gives rise to the prediction that unemployment durations will further increase in the closer future.
The extent of the labor demand drop differs substantially between sectors. Figure 2 tracks the 5 sectors with the largest amount of job postings (which cover more than 35% of the newly published job ads). Whereas the catering industry postings dropped by about 75% compared to the pre-year period, and retail by about 50%, the postings in the health and public sectors were much less affected (only about 20%) by the shock wave of the first lock-down [Novalytica/x28 2020a]. Subsequently, the most substantial recoveries in the demand drop are seen in the retail and the catering sector, which most obviously benefitted from the stepwise re-openings in May and in June. However, the recovery in the catering industry did not last for long, it has also been badly hit by the second wave of the pandemic which came up towards end of October [Novalytica/x28 2020b]. The drop is of the same dimension as in the first wave, as Figure 2 shows, even though the Swiss government decided not to go into a full lock-down and restaurants remained open in some areas of the country. This substantial drop documents the rapidly worsened expectations in the catering sector, in view of an upcoming winter season and even half-year that will see continued heavy restrictions as well as fears to meet and travel.
Relatively mostly affected by increased unemployment are young workers. The number of youth unemployed (< 25 years) by end of May rose by 76.7% as compared to a year ago, reaching a rate of 3.4% [SECO 2020a]. The youth unemployment rate continued to rise to 3.9% in August, undoing the improvements over the last two years. By October, the rate declined a bit to 3.3% — thus, currently it seems to stabilize at a level which was common for the years 2012 to 2016, as Figure 3 documents. The youth unemployment rate by ILO definition amounts in Q3-2020 to 11.6% (EU: 17.9% as comparison) [BFS 2020b]. So far, youth unemployment did not reach the peak level of the financial crisis (5.4% by SECO definition, see Figure 3). One reason that prevented the youth unemployment rate from going higher so far is the stability on the apprenticeship market: in spite of the crisis, the firms did not significantly reduce the offer of apprenticeships (see also further below).
The impact of the Covid crisis on rising unemployment is broadly spread across industries and jobs. Massively affected is the gastronomy and hospitality sector, over-proportionally affected are construction and the machine, watch and metal industries. Areas within Switzerland that heavily rely on tourism tend to show larger increases in the local unemployment rates. Also, areas where export-oriented industries (except pharmaceuticals) and finance are strongly represented tend to suffer relatively more. Interestingly, the unemployment shock affected both of each, women and men, foreigners and Swiss, German-speaking and Latin areas, to about the same relative extent.
Long-term unemployment started to rise substantially in the last months since March 2020. This is not unexpected because, as mentioned earlier, the relatively persistent drop in labor demand makes success in job search more difficult. As Figure 4 shows, already by the end of October the level of long-term unemployment reached the level of the last peak, dating back to February 2017. A further increase is to be expected. The duration of the continued health crisis and the reduced labor demand will crucially determine whether long-term unemployment will soon reach the levels of the Financial Crisis or not.
By the end of April, about half of the total Swiss workforce (5.1 million workers in Q1-2020, [BFS 2020a]) did rely on some support of one of the main (extended) social insurance/support schemes, i.e. unemployment insurance, the short-time work scheme or the Income Compensation Act (EO, Erwerbsersatzordnung). For more details on the use and evolution of short-time work, see section “Support of dependent workers” below.
- These are the official figures for the rate of registered unemployment (i.e., in unemployment insurance), reported by the Swiss State Secretariat of Economic Affairs (SECO). The unemployment rate according to the ILO definition, based on the labour force survey, amounts to 4.5% for Q1-2020 (not yet affected by Covid) [BFS 2020a, Swiss Federal Statistical Office].
- The youth unemployment rate by ILO definition is at 7.2% in Q1-2020 [BFS 2020a], before Covid. (EU: 15.3%)
According to the latest official figures released by the Office for National Statistics (ONS), the UK labour market has been hit hard by the COVID-19 crisis. Between March and September 2020, there was a 673,000 fall in employee jobs (Figure 1), and an unprecedentedly large increase in unemployment claims of 1.5 million, representing a 115% increase from March to July (Figure 2). For both employment and the claimant count most of the change occurred during April and May.
The unemployment rate measured using data from the Quarterly Labour Force Survey (QLFS) remained relatively stable until the beginning of July (Quarter 3 Week 1 – Figure 3). Subsequent to this, an upward trend starts to be visible – according to the latest ONS statistics the average unemployment rate from June to August was 4.5%. Table 1 shows how different age groups and gender experienced a change in their probability of becoming unemployment relative to the pre-lockdown months of 2020 until the end of June. Younger workers (16 to 24 years of age) have seen a statistically significant increase in their unemployment probability of 0.8 percentage points, with other older workers showing insignificant changes during this period. The change in the probability of unemployment was similar and statistically indistinguishable across genders.
Both employment counts and unemployment rates are very likely to be misleading with respect to the real impact of the COVID-19 crisis on the UK labour market. As pointed in work by Bell et al (2020), these statistics do not account for the substantial drop in hours worked in the economy and the government job protection assistance that largely shielded workers from losing their jobs during the period of analysis.
After a pronounced drop between March and June of 56%, vacancies increased during July and August, but at 517,000 still remain 32% below March levels (Figure 4). Similarly, in Figure 5 one can observe that after the largest annual decrease in average weekly hours of the past 10 years occurred (falling by 6.9 hours), average hours have slowly recovered until the end July (but still remaining 3.6 hours lower). Table 2 offers the breakdown across age groups and gender with respect to total hours worked. All age groups have seen their hours drop significantly and in comparable absolute terms, however when adjusted to their pre-lockdown mean we find that a similar detrimental pattern towards younger workers with significantly lower percentage drops (27.6%) relative to older workers (17.5% to 23.2%). The differential impact between male and female workers is significantly different in absolute magnitudes with women seeing a lower reduction in hours of 1.4 hours on average compared to their male counterpart, however this gap disappears when adjusted to the pre-lockdown mean of the groups (0.2%). Not surprisingly the abrupt drop in hours worked was caused primarily by a very significant increase in workers temporarily away from paid work as seen in Figure 6. This increase was steep and almost immediate following the lockdown announcement, two weeks after lockdown the count of workers declaring to be temporarily away from work had increase by 3 times the pre-lockdown level to 7.7 million. Once again younger worker experienced a shaper increase in their probability of being temporarily away of 22.5 percentage points when compared to older workers (13.2 to 17 percentage points), without no significant gender differentials (Table 3). Figure 7 presents the evolution of workers declaring to have worked fewer hours than usual by cause: hours vary, sickness or injury, economic conditions (laid off/short time/work interrupted), personal reasons (emergencies, family and/or personal reasons) or others (bank holiday, maternity/paternity leave…). A striking pattern emerges post-lockdown with a sharp increase among those declaring economic conditions and others as causes of their decrease in hours. Looking at the probability of declaring lay off/short time as the reason behind the hour shrinkage among employed workers, Table 4 shows that this has increased by 13.3 percentage points post-lockdown with stronger effects among the young and a significant although small gender differential in detriment of women.
Between the months of April to July average earnings growth has been falling accumulatively -3.9% for total pay (August showing a recovery of 1.9%) and median pay after a fall until June has recovered to March levels in August for payrolled employees. The most recently available monthly GDP growth statistic points to an unprecedented contraction of the economy beginning in March with a 1.8 % fall (compared to the three months prior) followed by sustained falls ranging from 10.4 % (April) to 21.7 % (June) with latest available estimate of 12.3% in August. This contraction of the economy vastly surpasses that experienced at the peak of the 2008 financial crisis (Figure 8).
The most affected sectors are customer-oriented personal and domestic services: Non-food, non-pharmaceutical retail; passenger transport; accommodation and food; travel; childcare; arts and leisure; personal care; domestic services. The combined employment in these sector accounts for roughly 15% of employees in the UK. These sectors have experienced the large contractions in output with gross valued added growth since March on negative ground of 19.6%, and as high as a staggering 46.9% for accommodation and food service activities (Figure 9). According to the latest ONS survey figures, with the relaxing of lockdown restrictions the sectors that previously reported higher percentages of temporary cease of trading, accommodation and food service activities (74%) and arts, entertainment and recreation (75%), show as of late August percentages of currently trading of 85.1% and 67.2% respectively. Despite the shy recovery in overall vacancies, drops remain significant in these sectors (49% and 79% respectively) with Figure 10 showing that not all sectors have been equally hit.
The composition of workforce in most affected sectors is not homogeneous: being disproportionally young (2.5 times more likely to work in sector in lockdown), concentrated among low earners (7 times more likely to work in sector in lockdown), gender biased (women are 33% more likely to work in sector in lockdown), self-employed intensive (22% of self-employed work in affected sectors). According to the latest QLFS data and as shown in Figure 5 the loss in weekly hours worked has been particularly pronounced among the self-employed with a drop of 8.7 hours on average comparing the periods pre- and post-lockdown until the end of July. Weekly hours worked prior to lockdown had been on average similar between employees and self-employed (32.2 and 31.9) but the lockdown has affected the self-employed significantly more with a 27% drop in hours relative to 10% felt by employees. The sharper fall in hours of self-employed does not exhibit significant differential patterns across ages or gender. Further analysis of QLFS data shows that, adding to the steeper reduction in hours, self-employed workers have seen a sustained drop in their employment count, 200,000 since March to July (5.8% reduction) significantly more noticeable than employee workers.
- Note that employment numbers as presented are likely to underestimate the actual fall in total work as they do not account for self-employment.
- Unfortunately the microdata referring to the month of July is not available at this point in time, although main aggregate statistics such as unemployment rate have been already produced by ONS.
- Exception to the significant decrease among older workers (55–64) of 1 percentage points.
- Business Impact of COVID-19 Survey, 24 August – 6 September, ONS.
- The May figures show a slight improvement relative to the temporary cease of trading experienced in the April by the same sector (80% and 81%).
- See Joyce and Xu (2020).
- Authors’ calculations.
Official unemployment statistics for the United States are based on a monthly household survey, the Current Population Survey (CPS). They are released at the beginning of each month and reflect the unemployment situation in the middle of the prior month (specifically, the week including the 12th of the month). A separate employer survey tracks changes in payroll employment.
Widespread mandatory business closures and social distancing practices led to an unprecedented fall in employment and rise in unemployment in the United States in the spring. According to the U.S. Bureau of Labor Statistics (BLS), the official unemployment rate was 14.7 percent in mid-April, the highest since the Great Depression of the 1930s. Owing to potential problems in the coding by interviewers of individuals who were not at work during the survey week, the BLS reported that the unemployment rate could have been up to 5 percentage points higher. The employment-to-population ratio for those age 16 and older, also known as the employment rate, was 51.3 percent, the lowest rate recorded in the history of the series, which date back to January 1948.
Reflecting the loosening of restrictions on business openings, the employment situation has improved considerably since April. By October, the unemployment rate had fallen to 6.9 percent, though it was still nearly double the rate prior to the start of the crisis. Similarly, the seasonally adjusted employment rate for those age 16 and older had risen to 57.4 percent but remained well below the pre-crisis level. Figure 1 depicts monthly estimates of the employment rate for “prime-age workers”—those age 25-54 who generally have completed their schooling and have not yet retired. The employment rate for this group plummeted by over 10 percentage points from 80.3 percent in February 2020 to 69.8 in April. Since then, it has steadily risen and by October was 76.4 percent, though still 4.3 percentage points below its level in October 2019.
Administrative data on the number receiving unemployment insurance, which are published weekly, similarly depict a surge in unemployment during the crisis. Figure 2 displays trends in the number of people previously in wage and salary jobs receiving regular state unemployment benefits from October 2019 to October 2020. That number started rising sharply in mid-March and peaked at 25.9 million in early May. Since then the number receiving unemployment insurance has steadily fallen and in late October was 7.3 million. Because this figure does not count those who are unemployed but do not normally qualify for unemployment benefits, which includes the self-employed, new entrants to the labor force, and those who have exhausted their regularly unemployment benefits, the concept is different from that measured in the household survey.
Analysis of unemployment insurance claims from the state of California in the spring revealed extraordinarily high rates of claims among young and low-educated workers. By May, one-third of wage and salary workers age 16-23 and one fourth of those age 24-39 had filed for unemployment benefits. Especially striking is the fact that nearly half of those without any college education in California had applied for unemployment benefits.
Mirroring the dramatic rise in unemployment, figures from the BLS employer survey show (seasonally adjusted) payroll employment falling by 22.1 million between February and April. Job losses were widespread across sectors but were especially steep in leisure and hospitality, education and health, professional and business services (particularly temporary help agencies), and retail trade. By October, more than half of the job losses sustained in the spring had been recovered.
Minorities, women, and the low educated have experienced particularly steep reductions in employment, reflecting in part the composition of employment in sectors hardest hit by the crisis. Between October 2019 and October 2020, the employment rate among all workers age 16 and older fell by 3.5 percentage points. Over the same period the employment rate fell by 3.0 percentage points among Whites, 5.3 percentage points among Blacks, and 4.7 percentage points among Hispanics.
Interestingly, the employment rate has fallen somewhat more among prime age workers than among those under age 25 and over age 54. This fact largely reflects the steep employment declines among prime-age, low educated women. Figures 3a and 3b display the seasonally unadjusted monthly employment rates in 2020 for men and women by educational attainment (high school degree or less, some college, and four-year college or post graduate degree). In October the employment rate was between 3.5 and 4.1 percentage points lower compared to that at the beginning of the year for men of all educational levels and for college-educated women. In contrast, for women with a high school education or less or with some college, the decline was 7.1 and 6.3 percentage points, respectively. While the relatively sharp declines in employment among low-educated prime-age women is partly due to the fact that they were disproportionately employed in service industries hardest hit by the pandemic, it also reflects their role as caregivers. Many schools and daycare facilities have closed during the pandemic, and mothers have been more likely than fathers to provide childcare in these circumstances. The decline in employment among prime age women exceeds that among prime age men by more than a million, despite the fact that men outnumber women in the workforce.
In addition to job loss, many people have experienced lower earnings because of reduced hours or a pay cut owing to the financial stress experienced by their employer or their business. New data from the U.S. Census Bureau show that in the latter part of October, 45 percent of those surveyed reported that they or someone in their household had experienced a loss of employment income since March 13. Those who were minorities, had low educational attainment, had low household incomes, and had children were substantially more likely to report a decline in income.