Europe set to shed more jobs as economic rebound flags
Covid-19 has already wiped out nearly half the jobs created since the last recession
20 August 2020 - 11:10
byCatherine Bosley and Albertina Torsoli
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Zurich/Geneva — European workers may be about to get another batch of bad news after a summer of job cuts and with the economic recovery threatened by fresh virus outbreaks and localised lockdowns.
Even as some governments consider extensions to job-protecting furlough programmes, the back-to-school period as the continent returns from the summer break is a crucial time for firms to assess demand, budgets and headcount for the rest of the year and into 2021.
Temping companies that match workers with employers say that will also determine whether European countries can continue to avoid the skyrocketing unemployment seen in the US. The outlook isn’t positive.
While state support has helped the likes of Germany, France and even Britain, some of that aid is due to expire. At the same time, the initial post-lockdown economic rebound is showing signs of abating, and some sectors are facing long-term shifts that will mean complete rethinks of business models and staffing.
“In September, they see how the order book is looking,” allowing for visibility until the end of the year, said Alain Dehaze, CEO of staffing giant Adecco Group, one of the world’s biggest staffing companies. “We expect unemployment to increase because some industries are structurally hit.”
The CEO of human resources firm Ranstad also says September “will probably really show the trend for the rest of the year”.
Even with the extensive furlough programmes, the labour market has already taken a massive hit. Nearly half the jobs — 5-million — created since the last recession have already been wiped out as a result of the pandemic. An economic rebound is under way after a 12% slump in the second quarter, but it’s expected to lose steam, resulting in more job losses.
Ryanair Holdings shows how the recovery won’t be smooth. Just weeks after increasing flights in response to pent-up demand from holidaymakers, Europe’s biggest discount carrier slashed capacity for September and October after newly imposed quarantine measures discouraged people from booking foreign trips.
While US unemployment has already shot up to double digits, Europe’s numbers look better for now thanks to the furloughs. But that won’t last. A Bloomberg survey forecasts the euro-area rate at almost 10% by the end of 2020, with very little improvement in 2021.
When “short-time work schemes come to an end, the fairy tale is unlikely to continue”, ING Group economists Carsten Brzeski, Bert Colijn and Carlo Cocuzzo said in a report this week.
They also noted that while the programmes work during cyclical shocks — such as the lockdowns — they’ll be less effective for industries undergoing structural change.
That includes the auto sector, which was already in for a seismic shift from combustion engines to electric. Tourism and business travel may not fully recover from the virus for years.
“Hospitality and events, retail, they will bounce back if this is very much Covid-related, we think,” Randstad CEO Jacques Van Den Broek said on an analyst call late in July. “But airlines and travel and automotive are sectors that seriously need to reinvent.”
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Europe set to shed more jobs as economic rebound flags
Covid-19 has already wiped out nearly half the jobs created since the last recession
Zurich/Geneva — European workers may be about to get another batch of bad news after a summer of job cuts and with the economic recovery threatened by fresh virus outbreaks and localised lockdowns.
Even as some governments consider extensions to job-protecting furlough programmes, the back-to-school period as the continent returns from the summer break is a crucial time for firms to assess demand, budgets and headcount for the rest of the year and into 2021.
Temping companies that match workers with employers say that will also determine whether European countries can continue to avoid the skyrocketing unemployment seen in the US. The outlook isn’t positive.
While state support has helped the likes of Germany, France and even Britain, some of that aid is due to expire. At the same time, the initial post-lockdown economic rebound is showing signs of abating, and some sectors are facing long-term shifts that will mean complete rethinks of business models and staffing.
“In September, they see how the order book is looking,” allowing for visibility until the end of the year, said Alain Dehaze, CEO of staffing giant Adecco Group, one of the world’s biggest staffing companies. “We expect unemployment to increase because some industries are structurally hit.”
The CEO of human resources firm Ranstad also says September “will probably really show the trend for the rest of the year”.
Even with the extensive furlough programmes, the labour market has already taken a massive hit. Nearly half the jobs — 5-million — created since the last recession have already been wiped out as a result of the pandemic. An economic rebound is under way after a 12% slump in the second quarter, but it’s expected to lose steam, resulting in more job losses.
Ryanair Holdings shows how the recovery won’t be smooth. Just weeks after increasing flights in response to pent-up demand from holidaymakers, Europe’s biggest discount carrier slashed capacity for September and October after newly imposed quarantine measures discouraged people from booking foreign trips.
While US unemployment has already shot up to double digits, Europe’s numbers look better for now thanks to the furloughs. But that won’t last. A Bloomberg survey forecasts the euro-area rate at almost 10% by the end of 2020, with very little improvement in 2021.
When “short-time work schemes come to an end, the fairy tale is unlikely to continue”, ING Group economists Carsten Brzeski, Bert Colijn and Carlo Cocuzzo said in a report this week.
They also noted that while the programmes work during cyclical shocks — such as the lockdowns — they’ll be less effective for industries undergoing structural change.
That includes the auto sector, which was already in for a seismic shift from combustion engines to electric. Tourism and business travel may not fully recover from the virus for years.
“Hospitality and events, retail, they will bounce back if this is very much Covid-related, we think,” Randstad CEO Jacques Van Den Broek said on an analyst call late in July. “But airlines and travel and automotive are sectors that seriously need to reinvent.”
Bloomberg
UK economy shrinks by record 20.4% in second quarter
Questions about UK’s Covid-19 response as economy is battered
Why Boris Johnson is so eager to reopen UK schools
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.