Under normal socio-economic conditions, increased annual growth in employment is typically accompanied by a decrease in the unemployment rate. However, there may be a time lag between these two indicators, as is currently the case in Luxembourg.

While the unemployment rate has remained comfortably below the 5% mark since January 2022, indicating a resilient economy even in the face of continued monetary tightening in the euro zone, the annual change in employment has been steadily declining. It has decreased from 3.8% in January 2022 to 2.5% in April 2023, suggesting a cooling in the employment market, which is the opposite trend.

Job vacancies

The declining annual growth in employment is evident in the decreasing number of new job vacancies and the total vacancies available, as announced by the Adem jobs agency at the end of each month.

The post-covid recovery in 2021 witnessed a year-on-year surge of over 50% in both new announcements and total job availability.

However, since the beginning of 2022, the annual change has been on a decline. By April 2023, both indicators had contracted by over 20%.

This highlights the fact that businesses are significantly reducing new job openings, which will likely have a dampening effect on economic growth.

Labour market tightening

The tightening of the labour market, as measured by the ratio of total vacancies to the number of registered jobseekers, has been on a decline since mid-2022, indicating a reduced number of jobs available for potential candidates.

Similarly, the job vacancy rate, which reflects unmet labour demand and measures the proportion of total job vacancies that remain unfilled, has also been declining since mid-2022.

While both indicators still remain above historical levels, such as the averages from 2015 to 2020, the recent downward trend suggests that the business economy is becoming less optimistic about future growth rates and is scaling back on their recruitment efforts.

Layoffs

Since companies and business enterprises announce new job openings, which sometimes include positions to replace current employees, the number of layoffs, though not directly available, can be indirectly assessed by examining the number of jobseekers receiving unemployment benefits.

And, in principle, the proportion of jobseekers receiving unemployment benefits compared to the total number of registered unemployed individuals can serve as an indicator of an increase  or decrease in layoffs.

Currently, the data suggests that the layoffs are increasing, as evidenced by the share of registered jobseekers receiving unemployment benefits peaked in March and April 2023.

In absolute numbers, there were more jobseekers on unemployment benefits during covid period than present but the numbers are rising again since mid-2022. There were 7,526 individuals receiving unemployment benefits in June 2022, which has increased to 8,780 as of end of April 2023.

Overall, the various indicators discussed above related to employment and job vacancies suggest that businesses in Luxembourg are anticipating an economic slowdown.

In line with this, Statec, Luxembourg’s statistics bureau, published its first economic forecast of 2023 on Monday 12 June, , “against a backdrop of sluggish economic activity, employment should slow in 2023 and 2024, but unemployment should only increase moderately.”