The European Union’s statistical office, Eurostat, said on Wednesday that the European Union’s unemployment rate rose to 6.6% in April from 6.4% in March.
Job losses have not spread evenly across all European Union countries. Spain’s unemployment rate, which was severely affected by the coronavirus, rose to 14.8% from 14.2% the previous month. Meanwhile, Germany kept the unemployment rate steady at 3.5%, according to Eurostat.
Economists partially attribute the widespread dependence on short-term work programs, which encourage troubled companies to retain employees but reduce working hours. Then the state subsidizes part of their wages. In Germany, for example, the government covers between 60% and 67% of the wages for working hours.
“The short-term action plans are incredibly effective in mitigating the initial impact of the economic crisis,” Bert Collagen, chief Eurozone economist at the Dutch bank ING, told clients on Wednesday.
At the end of April, companies in the European Union submitted nearly 42 million requests to support workers with short-term work programs, according to a study by the European Trade Union Institute. This equates to approximately 27% of all EU staff.
But UPS economist Anna Titarifa says that labor market surveys may not reflect the full extent of the damage done to European Union workers. The survey surprisingly showed that unemployment in Italy fell to 6.3% from 8% in March.
“It appears that some people who have lost their jobs after applying the mobility restrictions have not been counted as unemployed,” Titariva said in a research note.
To be considered unemployed for the purposes of the European Union survey, a person must actively look for work and be ready to start a new job within the next two weeks. Titariva said that movement restrictions or ongoing childcare needs may have forced people to stop looking for work.
Going forward, much depends on the duration and magnitude of the economic slowdown. Short-term programs of work in Europe work well as measures to bridge the gap, but they can only be used on a temporary basis.
“As the recovery is likely to continue for some time, unemployment is set to rise significantly, although working in a short time will help production recover more quickly once demand returns,” Collign said.