A Hot Labor Market in a Chilling Economy: The Conference Board

A new report by The Conference Board reveals early signs of a race among European employers to hire AI-ready talent as companies grapple with a slowing economy, a hot labor market, and declining productivity. The report, A Hot Labor Market in a Chilling Economy, details a dramatic uplift in demand for cognitive, human-based skills over the last twelve months.

Skills like curiosity, teamwork, adaptability, and communication are increasingly sought after by European employers: ‘willingness to learn’ saw a 61 percent rise in demand between Q2 2022 and Q2 2023, followed by ‘collaborating in teams and networks’ (49 percent), according to recent data analyzed by The Conference Board. Such skills are key to harnessing the opportunities offered by AI.

“The data suggest that employers are pinning their hopes on hiring workers who can take advantage of recent developments in AI to overcome the broader challenges that they are facing in the European labor market,” said Sara Murray, Managing Director, International, The Conference Board.

“As our report highlights, labor productivity has flatlined over the last three years, while the scarcity of workers is driving up costs for businesses and putting pressure on European competitiveness. In this environment, it is unsurprising that employers are looking to exploit the productivity gains that AI is promising. However, employers should be aware that the impact is likely to vary by sector and industry.”

Among the report’s key highlights:

European employers are continuing to add staff, despite economic deceleration:

  • Jobs in the Euro Area grew by 0.2 percent in Q2, compared to the previous quarter (up 4.4 percent since Q4 2019).
  • The Euro Area jobless rate has stabilized at a record-low 6.4 percent, while additional potential workers also dropped to a record-low 13 percent.
  • Faced with declining productivity, businesses are having to increase staffing levels just to maintain current levels of output.

Hours worked per employee remains almost two percentage points below pre-pandemic levels. Three factors are driving this trend: 

  • Women and senior workers are making up an increasing proportion of the European workforce and both groups are likely to work fewer hours.
  • Competition to attract and retain workers means that employers are offering shorter working weeks and better annual leave plans.
  • Sick leave increased in the aftermath of COVID-19, with country-level data showing a significant spike in days lost to illness in 2022.

Divergent labor trends in Germany and France spell trouble for Europe’s economic outlook: 

  • Manufacturing jobs in Germany are down by 2.9 percent since Q4 2019, while employment in the private sector overall has shrunk by almost 1 percent.
  • Public sector job growth is the only bright spot for German workers, with employment increasing by 5.5 percent over the same period, a trend that is mirrored across the continent.
  • France, meanwhile, has recorded an impressive growth rate of 7.6 percent in the private sector, including 2.5 percent in manufacturing, with France outperforming the Euro Area in Q2 2023.
  • However, despite its robust performance, France has seen steep declines in labor productivity.

“Employers have multiple strategies available to deal with the challenging conditions. Regardless of the approach, they will need to strike a balance between filling vacancies and maintaining overall productivity,” said Jean Marc Verbist, Human Capital Center Leader, Europe, The Conference Board. “Expect to see companies put a lot of focus on workplace culture and adaptation to AI in the coming months. Employers can also combat unfilled job vacancies by widening their talent search, hiring under-represented groups like women, senior and foreign workers, and flexible labor. However, managers need to ensure that these approaches work in harmony together.”

Explore HRtech News for the latest Tech Trends in Human Resources Technology.