Employment slowdown signals macro challenges ahead

The employment growth rate in Luxembourg has been on a steady decline since 2022, reaching 0.82% in May 2024, a significant drop from 2.68% in January 2022. This downward trend continued even though the growth rate stood at 2.53% just a year ago. The national statistics bureau, Statec, attributes this decrease to the high interest rates set by the European Central Bank to combat high inflation in the euro area. These elevated rates have negatively impacted economic activity and job creation.

Historically, Luxembourg’s employment growth rate has fluctuated between 2% and 4%, except during the COVID-19 pandemic period of 2020-2021 and the 2008-2009 economic crisis, when significantly lower rates were observed. According to Statec’s projections, the employment growth rate will slow down to 1.3% in 2024, with a slight increase to 1.7% expected in 2025.

Simultaneously, unemployment has been rising, increasing from 4.91% in May 2023 to 5.57% in May 2024. Statec predicts that the unemployment rate will continue to rise, averaging 5.8% this year and 5.9% in 2025. The construction sector is not expected to be the only industry affected by this increase in unemployment.

The job vacancy rate, a measure of the ratio of registered job seekers to total open jobs at the national employment agency Adem, is gradually increasing but remains below 0.5. Statec does not make specific forecasts for this rate, but they expect the labor market to remain gloomy, suggesting that the job vacancy rate should not deteriorate too much.

.st1{display:none}See more