Economics in a picture

The reduction in firms’ hiring rates in one of the main transmission mechanisms by which the decline in economic activity affects the labour market. This can be observed in the reduction of labour market flows to employment, both from unemployment and inactivity. According to the Labour Force Survey released by Statistics Portugal, in the first quarter of 2020, 65.5 thousand individuals moved from unemployment to employment (1.3% of total labour force), which implies a decline vis-à-vis the average of the first quarters in the period from 2014 to 2019 (82.1 thousand individuals or 1.6% of total labour force). Flows from inactivity to employment also declined in the first quarter of 2020 vis-à-vis the average of the first quarters in the period 2014-2019 (2.0% compared to 2.3% of total labour force). 

Likewise previous periods of economic contraction, the decline in flows to employment tends to affect more significantly some groups in the population according to age and educational attainment. By educational attainment, the reduction in flows to employment, both from unemployment and inactivity, is particularly significant for individuals with primary education. On the other hand, the decline in flows from unemployment to employment is more noteworthy for individuals who are between 30 and 54 years old whereas the decline in flows from inactivity to employment seems to affect more significantly younger individuals.

For further details see Martins and Seward (2020): “The measurement of labour market slack: an empirical analysis for Portugal”, published in Banco de Portugal Economic Studies , vol. VI, 2.

Prepared by Fernando Martins and Domingos Seward. The analyses, opinions, and findings expressed above are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.

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