The strengthening of economic growth has led to a further improvement on labour markets. Eurostat’s latest unemployment figures, released today, show that EU unemployment is with 6.8% in July 2018 back to pre-crisis levels, and well below the 11% in March 2013 at the peak of the Eurozone crisis. Despite these improvements, unemployment rates still remain uneven across EU countries, with three EU Member States facing rates (well) above 10%. Of particular concern is that even at this early stage of the recovery, there are already signs of the emergence of a structural mismatch, where business across the EU increasingly report difficulties in hiring workers. As our Spring Economic Outlook outlined, the share of industrial enterprises which indicate that insufficient labour limits their production is already at twice the pre-crisis share and the highest on record since 1985. Against this background, we need to see urgent policy action to avoid that labour market mismatches increasingly act as a break on economic growth over the coming years.

Recent official data indicate that growth is slowing down in the first half of 2018. Eurostat reported that EU quarterly GDP grew by 0.4% in both the first and second quarter of this year, a clear slowdown from the very strong 0.6 to 0.7% quarterly growth during 2017 (see chart). EU growth thus returned to a pace last seen in Q3 2016. Against this background, we urge policy-makers to continue implementing labour and product market reforms as well as institutional reforms that make EU economies more productive and resilient. Doing so will increase the EU’s potential for long-term growth and job creation. Given signs of emerging supply constraints, it is particularly important to address structural constraints to growth such as remaining barriers to investment and labour market mismatches. It is key to improve work-orientated learning for all age groups, including the promotion of digital skills, as well as reforms which encourage people to stay longer in the workforce and ensure that legal migrants are properly integrated. NB: Eurostat data for the second quarter of 2018 is based on a preliminary first estimate from 31 July.