Eurozone labour productivity risks amid economic shocks: Fitch report

In the eurozone, companies have been notably retaining staff, a practice known as labour hoarding, despite only a modest increase in aggregate demand. This strategy could lead to swift workforce reductions if the expected demand fails to materialise. With a robust growth in labour supply, including rising participation rates, there is an enhanced risk of increasing unemployment rates should these conditions persist.

Contrastingly, the US has experienced a rapid recovery in aggregate demand, which has been the primary driver for expanding labour demand. However, this growth in demand comes amid subdued growth in labour supply and a decrease in participation rates, pushing businesses to optimise productivity by maximising output per worker hour, as per the report Labour Market Resilience in the US, Eurozone and UK.

In the UK, the situation presents a mixed picture. Labour demand has been weak, exacerbated by very low growth in labour supply as participation continues to fall. Despite this, the unemployment rate remains low, a reflection of an economy that is barely growing and a labour market constrained by limited supply rather than robust demand. The employment rate currently sits 2 percentage points below pre-pandemic levels, underscoring the ongoing challenges.

Fibre2Fashion News Desk (DP)