The Real Reason Why The Eurozone Is Suffering From Labour Shortages

Summary

• The drop in average hours worked in the eurozone is one of the biggest and somewhat overlooked shocks caused by the Covid-19 pandemic.
• We think this is the main reason for current labour shortages.
• This drives down potential output and causes inflationary pressure, which begs the question: can this trend be reversed?

Sviatlana Zyhmantovich/iStock via Getty Images

By Bert Colijn

Eurozone labour market: at a glance

• Average hours worked per employed person are still 2.2% lower than they were in the pre-pandemic years. This has a very large impact on the labour market.