Effects of the coronavirus pandemic on jobs and incomes

On the 22nd of December the European Commission published the December 2020 edition of the Employment and Social Developments Quarterly Review, analysing the effects of the coronavirus pandemic on jobs and incomes.

It shows that policy measures cushioned the impact of the coronavirus crisis, with employment falling less than GDP and unemployment remaining stable over the past months. Nonetheless, challenges remain. The impact of the crisis on young people is very serious, and unemployment may well rise over the next few months.

GDP increased by 11.5% in the EU and 12.5% in the euro area compared to the previous quarter, after having decreased respectively by 11.3% and 11.7% in the second quarter of 2020 compared to the first one. The year-on-year decline in the third quarter of 2020 was 4.2% in the EU and 4.3% in the euro area. In comparison the drop and subsequent rebound in the US economy was less pronounced, with a quarter-to-quarter decline of GDP of 9.0% in the second quarter and an increase of 7.4% in the third quarter of 2020. The decline was 2.9% compared to the third quarter of 2019.

Factors linked to the uncertainty in the growth forecast include the length and stringency of containment measures for the COVID-19 pandemic and the outcome of the EU-UK FTA negotiations. The EU GDP is expected to decline by 7.4% on average in 2020 and to grow by 4.1% in 2021and 3.0% in 2022

What we could see and feel in Belgium is that a lot more people came in difficulties to provide enough food for the family. A lot more people found their way to the “Voedselbanken” or “Food banks”. Luckily the Belgian government provided some extra money for factory- and white-collar workers and self-employed.

Short-time work and job-retention schemes contributed to reducing losses of employment. The number of hours worked increased by 14.8% in the euro area and by 11.9% in the EU in the third quarter of 2020, compared to the previous quarter. Hours worked per person employed approached again a quarterly average of almost 400 in the EU, but were still 3.5%below the level of 2012, which amounted to 413 hours.

On a quarter-on-quarter basis, total employment declined by 2.7% in the EU (-2.9% in the euro area)in the second quarter and increased by 0.9% both in the EU and the euro area in the third quarter. Employment in the third quarter of 2020 in the EU was1.9% less than the levels recorded in the same quarter of 2019 (-2.1% in the euro area)(Chart2). The reduction of employment was less dramatic than the drop of GDP and the reduction of working hours as a result of the policy measures taken by Member States. These included short-time work schemes, temporary lay-offs, and in some cases a temporary ban on layoffs. The Commission’s Autumn economic forecast predicts that, while these measures have been effective in protecting employment so far, the recovery will not initially be rich in employment as companies will first focus on re-instating temporarily laid-off workers and getting back to the previous level of working hours. Moreover, Member States might in 2021 discontinue or impose harder conditions on policy support schemes, with a potential negative effect on total employment.

People should know if they would very well keep to the measures demanded by the government, the damage could be contained. It all depends on the goodwill of people avoiding the spread of the coronavirus.

For sure the closure for months, many self-employed having to pay high rents without receiving an income from their business, will bring a burden on the coming months. Also there I think people could help to have a lesser impact of the income loss, by buying more products via the internet by local shops. Now is the time many found the way to shopping on the internet, but the big problem is that many looked for the goods on the so-called cheaper market, giving the opportunity some CEO becoming very rich on the heads of hard working too low paid workers.

You will not hear Jeff Bezos complain. This founder and boss of Amazon has seen his wealth swell by $24bn (£19bn) after soaring demand for online shopping sent the firm’s share price to a new high. Amazon is not the only big internet shop that has benefited from surging internet shopping by people forced to stay home during the Covid-19 outbreak. Bol.com saw the sales rising as well.

Sam Walton, who grew up during the Great Depression on his family’s farm in the early 20th century, founder of the multinational retail corporation Walmart

The family behind retail giant Wal-Mart, which owns Asda in the UK, have also gained during the lockdown. About half of Walmart’s stock is held by seven heirs of founders Sam Walton (d. 1992) and his brother James “Bud” (d. 1995). The Waltons, who may call themselves the richest family in the world, saw their net worth rise 5% this year to $169bn, making them the world’s richest family, according to Bloomberg.

With millions now working from home, online meeting site Zoom has seen the Chinese-born American billionaire businessman, CEO and founder of Zoom Video Communications Eric Yuan’s fortune more than double to $7.4bn.

For ordinary or common workers the Corona period was one where work fell away and the prices of the shopping cart increased. The EU review shows that the coronavirus crisis has caused an unprecedented loss in income from work. The impact has been particularly hard on workers who are already disadvantaged, such as the young and those on temporary contracts. Measures to compensate for lost wages have helped buffer the blow and support low-paid workers, who are disproportionally affected.

In October 2020, there were 16.2 million unemployed people in the EU and 13.8 million in the euro area, 0.1 million below the respective levels in September2020. The difference between the unemployment rate of women and men increased from 0.2pp in July (6.7% for women versus 6.5% for men) to 0.8ppin October (8.0% for women versus 7.2% for men).
Compared to October 2019, the unemployment rate increased strongly in Lithuania (+4.0pp) and Cyprus (+3.9pp), and declined only in Belgium and Greece (-0.1pp for both, August data for Greece)

Youth unemployment increased in both the EU and the euro areaby0. 1 pp in October 2020 compared to September, and stood at 17.5% and 18.0% respectively. The number of young unemployed people in the EU and in the euro area (3.1 million and 2.6 million respectively in October 2020) remained rather stable in the last four months. In October 2020, almost half of the Member States recorded an increase in youth unemployment compared to September 2020, but if compared to the same month in the previous year, all except two Member States experienced an increase. The monthly increases were highest in Greece (+3.3pp), Lithuania (+2.2pp) and Finland (+1.6pp), while the largest decreases were recorded in Bulgaria (-1.2pp) and Sweden (-1.0pp). On a yearly basis, the youth unemployment rate strongly increased in Lithuania (+13.1pp), Estonia (+11.4pp) and Spain (+9.2pp), and declined only in Hungary (-0.8pp) and Austria (-0.6pp).

The unemployment rate is expected to rise in the coming months, according to the Commission’s Autumn economic forecast and predictions from the IMF, OECD and ECB. We may not forget all the money now invested in measures to avoid businesses going broke, and the extra money for healthcare workers, hospitals, test centres, vaccines, all shall have to come from the public. We all shall come to feel it in the coming years.

In the second quarter of 2020, the unemployment rate in the EU stood at 6.7% (+0.2 compared to the previous quarter). Before the COVID-19 crisis, the Beveridge curve, which plots the unemployment rate against the labour shortage indicator, already took for more than one year a new direction towards a decrease in labour shortages. However, the current trends are not driven by the same factors as the 2019 developments, but rather by the current sanitary crisis, leading to reduced employers needs in terms of workforce and by consequence to a decrease in the number of new contracts or hours worked, which resulted in an increase of unemployment. The latest developments are better reflected by the monthly data, which show an increase of the unemployment rate in the third quarter of 2020.

The forecast foresees an increase both in the EU 27 and in the euro area in 2021 (8.6% and 9.4% respectively), before a reduction in 2022. {European Commission (2020), op. cit.} This could happen as a consequence of the abandonment of employment-saving policy measures by Member States and the reincorporation of job seekers in the labour force. Unemployment expectations measured by the EU Business and Consumer Surveys (BCS), also remain quite high following the sharp worsening of expectations during the spring wave of COVID-19 in several Member States.

According to quarterly LFS data, the number of involuntary absences from employment increased dramatically in the first half of 2020. Almost 20 million people were in temporary lay off and 7.8 million people absent because of illness or disability in the second quarter of 2020. This is about six times and twice the respective levels observed in the second quarter of 2019. {See also part II page 16, and https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Absences_from_work_-_quarterly_statisticsfor definitions}

Now with the hope of having vaccines to stop this crisis, we may have some light at the end of the tunnel. It also could be not such a bad thing most of the people were in the same bad situation and as such on the same level “infected”. Like with previous economic and health crises, the countries shall have to be “rebuild”. Also having some older population thinned out, there would be again more places in elderly homes at a cheaper rate and several houses had come free, because of the owners deceased or going to a care home, making that market also cheaper, except when there would be an increase of demand for big houses since people have felt those small houses are nothing when one has to stay in them by a lockdown. With older houses coming free on the market, there shall come more work to renovate them and as such more work-opportunities.

People are also are fed up with the situation and would love to go out again and enjoy life again. That shall give a boost to nightlife as soon as that would be possible again. I expect that there will be a state of a damage recovery, which will in some way limit the damage incurred.

Let us look forward to the hope for better times.

Read the Employment and Social Developments Quarterly Review for more details.