The EU labour market shrank by a record amount in the second quarter, as the number of people in employment fell by 5.5m.

The 2.6 per cent quarterly reduction reported by Eurostat on Friday underlined the dramatic impact coronavirus has had on the region’s job market. Many companies have shed large numbers of staff or placed a significant portion of workers on government-backed furlough schemes.

Eurostat said the job losses, which exclude most of the tens of millions of people on furlough across Europe, were even higher in the eurozone, where the number of people in work dropped 2.8 per cent in the second quarter. 

The 5.5m job losses in the EU, which included 4.5m job losses in the eurozone, were “the sharpest declines observed since [the] time series started in 1995”, Eurostat said. There were 209.1m people employed in the EU at the end of the first quarter, including 160.4m in the eurozone. 

The coronavirus pandemic dragged the eurozone economy into a historic recession in the second quarter, as gross domestic product fell by a record 12.1 per cent compared with the previous three months.

However since May there have been signs that the economy is recovering faster than expected. Eurostat said on Friday that exports from the eurozone rose almost a third between May and June, although they remain 10 per cent below the level of a year ago. Purchasing managers’ indices pointed to a strong rebound in activity for manufacturing and consumer industries across the eurozone in July.

Chart showing the change in the number of people in employment

Charles Hepworth, investment director at GAM Investments, said: “Whilst we are seeing a rebound in activity, it is clear it will be a slow and fragmented process as consumers still remain in a state of nervous exhaustion with the effects of the pandemic and potential lockdown re-impositions.”

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A number of governments have reimposed quarantine and testing requirements on travellers returning from popular holiday destinations after coronavirus cases rose sharply in many European countries, including France, Spain, the Netherlands, Portugal and Greece.

The Nordic region has avoided the worst of the economic fallout from the pandemic, as underlined on Friday when Finland and Denmark both published quarterly GDP figures that were better than most other European countries. 

Finland’s GDP fell 3.2 per cent in the three months to the end of June compared with the first quarter, while Denmark’s dropped by a record 7.4 per cent. But both Nordic countries fared better than Sweden, which had no formal lockdown, where the economy contracted by 8.6 per cent.

“There’s more to it than different lockdown policies,” said Andreas Wallstrom, acting chief economist at Swedish lender Swedbank.

Sweden’s death rate per capita from Covid-19 is five times that of Denmark and almost 10 times that of Finland. Proponents of its approach had argued its economy would be better protected and pointed to a better GDP performance than many other European countries.

Chart showing quarter on quarter change in GDP of European countries

Germany, Spain, France and Italy all reported quarterly GDP contractions of more than 10 per cent in the three months to June. UK output fell by more than 20 per cent in the quarter, according to data published earlier this week.

The Dutch economy shrank by a record 8.5 per cent in the second quarter, figures published on Friday showed, as the pandemic triggered a heavy fall in household spending and business investment. 

However a monthly survey of 7,500 Dutch companies found that overall business confidence had started to rebound, rising from a record low of minus 37.2 in April to minus 19.3 in July.

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Via Financial Times