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Europe chart of the week – Employment

Summary:
Average number of hours worked per employee suggests there is still slack in the euro area job market.Euro area employment grew for the 18th consecutive quarter in Q4 2017 (+0.3% q-o-q), and is now 1.5% above its pre-crisis (2008) level. By contrast, hours worked per person employed decreased during the same period, remaining 4% below their pre-crisis level.The two data series have followed divergent trends since the start of the economic recovery. Between Q1 2008 and Q2 2013, the total amount of labour input used by firms decreased massively. The fall was more significant in terms of total hours worked than in terms of headcount. Underlying these developments was a fall in average hours worked per person, which then remained broadly stable during the recovery (see chart below). To a

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Average number of hours worked per employee suggests there is still slack in the euro area job market.

Europe chart of the week – Employment

Euro area employment grew for the 18th consecutive quarter in Q4 2017 (+0.3% q-o-q), and is now 1.5% above its pre-crisis (2008) level. By contrast, hours worked per person employed decreased during the same period, remaining 4% below their pre-crisis level.

The two data series have followed divergent trends since the start of the economic recovery. Between Q1 2008 and Q2 2013, the total amount of labour input used by firms decreased massively. The fall was more significant in terms of total hours worked than in terms of headcount. Underlying these developments was a fall in average hours worked per person, which then remained broadly stable during the recovery (see chart below). To a large extent, steady hours worked per employee is the result of an increase in part-time employment. Some workers may have chosen to work part-time, but many workers may also have involuntarily accepted part-time employment. There are currently more than 6.6 million underemployed part-time workers in the euro area, one million more than before the crisis, which helps explain subdued inflation dynamics.

In his seminal ‘Scars or scratches?’ speech last year, ECB Executive Board member Benoît Coeuré stressed the importance of structural adjustments in the labour market, and suggested we pay attention to the “intensive margin”, which shows when hours worked increase to the point where discouraged workers start to be reabsorbed. The latest data suggest that we have not reached this tipping point, adding to the case for prudent monetary policy normalisation.

Mr. Frederik Ducrozet is a Senior Econoist at Banque Pictet & Cie SA, Research Division. Prior to this, he served as Senior Eurozone Economist at Credit Agricole Corporate and Investment Bank, Research Division from June 2006 till September 2015. He joined Crédit Agricole SA in 2005. Mr. Ducrozet contributed to the various publications of the research department, with a special focus on macroeconomic developments in Eurozone countries, including on the outlook for fiscal policy and the ECB’s monetary policy. Nadia Gharbi is economist at Pictet Wealth Management. She graduates in Université de Genève, Les Acacias, Canton of Geneva, Switzerland Do not hesitate to contact Pictet for an investment proposal. Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.

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