Despite economic growth beginning to weaken from the second half of 2022 in the wake of Russia’s invasion of Ukraine and the ensuing energy crisis, the EU labour market has been ‘extremely’ resilient, according to a report by the European Commission.

The report found that the EU unemployment rate stabilised at a record-low level of about 6%, while employment continued expanding at an annual rate of 2% in the first half of 2023, with many businesses continuing to report labour shortages.

EU GDP growth in 2022 reached 3.5 %, compared with an initial forecast of 2.7% in Spring 2022, and the economic slowdown at the end of the year did not turn into a recession.

The Commission’s ‘Labour Market and Wage Developments in Europe’ report assesses the situation and prospects for the EU labour market, in an economic context characterised by persistently high inflation and unfading uncertainty.

According to the report, while some differences in employment growth are visible across sectors, with the more energy-intensive industries recording lower job creation, the sharp rise in energy prices did not translate into increased job destruction.

“This overall good performance is remarkable, as the unemployment rate tends to rise when GDP growth is positive but weak,” the report stated. “This can be explained by the still very tight labour market conditions: a further weakening of labour demand is not expected to lead to a significant increase in unemployment, as employers would first withdraw unfilled vacancies before resorting to dismissing workers.”

Employment growth has been supported by an increasing labour supply, with labour market participation resuming its long-term rising trend after a temporary contraction during the Covid‑19 pandemic. An important contribution to increased participation has come from women and older workers, as well as EU mobile citizens and non-EU nationals. This puts the EU on track to achieve one of the headline targets of the European Pillar of Social Rights, that of having 78% of the working age population in employment by 2030.

At the same time, in half of the member states where they exist, statutory minimum wage policies have succeeded protecting the purchasing power of minimum-wage earners over the period from January 2022 to July 2023.

Looking ahead, while real wages are still expected to decrease in 2023, moderate long-term inflation expectations and the resilience of businesses’ profit margins in some sectors suggest that there is room to further increase wages, while remaining vigilant about second-round effects on inflation.

The report also showed that working time in EU Member States has been gradually decreasing, with an acceleration during the Covid‑19 pandemic. Between 2008 and 2022, the average weekly hours worked decreased in the EU by 2%, while average annual hours decreased by 5%.

In almost all member states, statutory weekly hours are either capped at the limit of 48 hours (as set by the EU working time directive), or at a lower level of 40 hours. Only in Belgium and France is the limit lower.

On average, women, as well as younger and older workers tend to work shorter weekly hours, while self-employed people, better educated workers and people with migrant backgrounds tend to work longer hours.

The gender gap in working hours has been narrowing but remains significant, especially in countries lacking robust care services and without policies geared towards the full-time integration of women into the workforce.

Furthermore, the report shows that working time reduction policies can reduce working time mismatches and improve workers' well-being, hourly productivity and pay. However, their impact on employment rates and broader economic effects remain ambiguous.