Europe’s labour shortages – not all equal

Although reported labour shortages in the eurozone appear to be worsening, our analysis of the underlying dynamics shows a more nuanced picture. We think the shortages in manufacturing and services are more cyclical in nature and should ease faster, while those in construction appear more structural.

What you will learn:

• Severe labour shortages in manufacturing and services are occurring amid a strong cyclical rebound in demand, which we expect to revert to trend in line with forward-looking indicators.
• This is not the case for construction, where we expect demand to remain elevated.
• Both the manufacturing and services sectors can draw on untapped labour resources, as employment in each is still around 2% below pre-pandemic levels.
• Employment and vacancies in construction have already surpassed their previous peaks and scope for productivity gains is limited.