EU economy and recovery_SN_Fig 5

Despite stagnant output, the EU economy created over two million jobs in 2023, achieving a record-high employment rate of 75.7 % among people aged 20-64. The unemployment rate stood at a record low of 6.0 % in April 2024. This robust labour market performance is attributed to favourable developments in both labour demand and supply. On the supply side, labour migration mitigated skills and labour shortages. On the demand side, targeted fiscal policies, such as apprenticeship schemes or tax credits, have been conducive to employment growth.
In contrast to the tightening of monetary policy in the 1970s, the current tightening cycle did not have a big impact on employment rates. One reason is that the adjustment process in the current inflationary period worked through wages instead of employment, where real wages have fallen more than productivity. High profitability together with relative scarcity of skilled labour led firms to keep existing employees and even create additional jobs.