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The situation in the Swiss labor market has eased somewhat recently. However, many people stopped looking for work in the second quarter. Where did the employees go previously?
Unemployment rose again in August. Since February, before the outbreak of the Crown crisis, the unemployment rate in Switzerland has risen from 2.5 to 3.3%. As of August of the previous year, the number of registered in the regional employment centers (RAV) increased by 52,000 people. However, the rise in unemployment in recent months only partially reflects the reality of the labor market. Because the changes in the workforce are significantly larger than the unemployment figures suggest.
Many job seekers have withdrawn from the labor market and are no longer registered with the regional employment centers.
From the end of 2019 to the second quarter, the number of employed people decreased by 106,000. However, according to Michael Siegenthaler of ETH’s Center for Economic Research (KOF), about half of those previously employed do not appear in unemployment or unemployment statistics.
This suggests that many people have withdrawn from the job market. Many of those who wanted to work stopped actively seeking work. According to Siegenthaler, this is probably a good 1% of the working-age population. In view of the lockdown, the reduction in the number of jobs and the increased search time for the unemployed, this is not surprising.
The young and old would like to work
Nonetheless, the development is remarkable, especially since there hasn’t been one in the Swiss job market for a long time. The last time this happened was during the oil crisis in the 1970s, when many women left the labor market and foreign workers, who were the first to lose their jobs, returned to their home country. This time the situation should look different. Large-scale migration is not perceived. Women do not appear to be particularly affected by unemployment either.
If you look at who would like to work but are no longer actively looking for work, all age groups are affected: the very young and the elderly (65+), but also those aged 25 to 65 – in some cases, it is likely let this be so. Students and retirees who have lost their part-time or (in the middle-aged segment) also deal with parents who had to take care of their children during school closings.
More posts again
Siegenthaler assumes that the situation has already improved somewhat and that more people have returned to the job market. According to data experts at Novalytica and HR technology company X28, the number of jobs posted in Switzerland increased by more than 50% from June to August 2020 to around 40,000 ads. However, the level remains well below the previous year: 15% fewer job advertisements were published in August 2020 than in the same period of the previous year. At the same time, according to labor market expert George Sheldon, the average length of unemployment has risen to around seven months, which is almost double the number at the beginning of the year. He expects the share of long-term unemployed to increase significantly next summer.
The fact that people have withdrawn from the labor market can also be observed in Germany, Italy and the United States. In Italy, unemployment even decreased during the shutdown, which is probably also related to the ban on layoffs. Even after the financial crisis, the US had experienced a sharp decline in the workforce, with devastating consequences such as widespread health and psychological problems in certain population groups. For Switzerland, however, there is currently no reason to assume that the special situation will last for a long time.
Without part-time work, unemployment would have skyrocketed
Youth unemployment, in particular, has increased in recent months: from 2.5% in the previous year to 3.9% in August. Typically, unemployment among 15-24 year olds rises in the summer months, as many later finish their training and go looking for work. However, with the outbreak of the Corona crisis, it is particularly difficult for them to enter the labor market.
However, the reduced working hours have contributed significantly to dampening the situation in the labor market, as Boris Zürcher from the Secretary of State for the Economy (Seco) explained on Wednesday. According to rough estimates from Seco, without the reduced working hours, unemployment would have soared to more than 20% in April. With the opening of the economy in May and June it would have been around 8%.
With a view to part-time work, the situation has visibly relaxed. On the one hand, significantly fewer employees claimed compensation for reduced-time work than suggested by the high number of early registrations. About 1.9 million people or 37% of local employees signed up for part-time jobs in the months of April to June. In fact, however, “only” 1.3 million people used the service in April, up from 1 million in May and 500,000 in June (although a slight upward adjustment is expected for June).
On the other hand, companies have recently submitted significantly fewer applications for short-time work: 407,000 applications were approved in September, corresponding to around 7.9% of employees. As a result, the anticipated expenses for short-time work are likely to be significantly less than the 20 billion Swiss francs originally estimated by Seco. According to Seco, the labor law measures have also made a significant contribution to cushioning the loss of employee income caused by the crisis.
In general, the situation has stabilized in recent months since the lockdown ended. One reason for this is the partial recovery of the hotel industry, which has benefited from the lively influx of domestic guests in the mountainous regions. More workers were also employed in construction. However, the number of unemployed is likely to continue to rise in the coming months. This is indicated, on the one hand, by the relatively high number of job seekers who are not (yet) registered as unemployed because they are within the notification period.
Good thing than expected
On the other hand, the increasing mass layoffs are likely to be reflected in the unemployment figures with a time lag. However, according to Seco, “only” 139 companies announced significant cuts in personnel between March and August. A total of 8,000 employees are affected. A large wave of layoffs does not appear in Zürcher’s trial at the moment.
In view of the quite positive evolution, Seco economists have revised their forecast for the labor market. They expect the average unemployment rate to be below 3.5% in 2020. In June they were still assuming a value of 3.8%. According to federal economists, the drop in gross domestic product (GDP) will also be less pronounced than previously feared. They are now assuming a 5% drop in GDP, after forecasting a 6.2% drop in June. An important prerequisite for this is that there is no further massive spread of the coronavirus, as well as severely restrictive containment measures both domestically and with major trading partners, economists claim.
