Why Europe’s Labor Market Has Not Imploded Yet

Europe has recently experienced a significant period of sub-par economic growth, with the GDP consistently falling below the potential rate of 1.4-1.5% year-on-year for six consecutive quarters since the beginning of 2023. Despite this, the labor market across the European Union (EU) has shown an unusual degree of resilience. Historically, such prolonged economic weakness would have resulted in a noticeable increase in unemployment, typically by around 1 percentage point or more. However, as of June 2024, the EU’s unemployment rate remained stable at 6%, down slightly from 6.1% in January 2023, maintaining a level close to its lowest point since the early 2000s.

Key Factors Contributing to Labor Market Resilience