Eurozone suffers record employment fall in Q2

The eurozone suffered a record decline in employment in the second quarter as the Covid-19 pandemic took its toll, according to figures released by Eurostat on Friday.

The number of people in employment fell by 2.8% quarter-on-quarter following a 0.2% decline in the first quarter and versus expectations of a 1.7% fall. On the year, the number of employed was down 2.9% following a 0.4% increase the year before.

In the EU, the number of people employed fell 2.6% on the quarter and 2.7% on the year.

Eurostat said "these were also the sharpest declines observed since time series started in 1995".

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the employment data showed that some workers fell through the cracks during lockdown, despite the quick mobilisation of job-retention schemes across all the major eurozone economies.

"Cumulatively, employment fell by 3.0% through H1, which is a fairly mild hit in light of the significant slide in output. Factoring-in the normal lag between shifts in the GDP and employment, the labour market will weaken further in H2, but the question is the extent to which workers currently furloughed will fall into unemployment once support schemes expire.

"Alternatively, we need to predict whether governments will extend the schemes, and by how long. In other words, we still don’t have a clear picture, though we are fairly confident that employment will weaken further in the next six-to-nine months."

Other figures from Eurostat confirmed that eurozone GDP contracted 12.1% quarter-on-quarter, in line with the estimate, dented by the Covid lockdown at the start of the quarter. This compares to a 9.5% contraction in US Q2 GDP and a 20.4% drop in the UK.

In the first quarter, eurozone GDP shrank 3.6%.