New EU index of labour market trends

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Policy makers, analysts, traders and businesses frequently need to understand the complex dynamics of national labour markets. Up to now this has meant looking at a number of statistics that only partially tell the story. However, the new labour market index (LMI) from the Federation of European Employers (FedEE) finally provides a composite measure that shows how well such markets are working.

It reveals... just how much the Spanish labour market is in an ongoing state of collapse

FedEE’s new labour market index (LMI) measures the degree of health of an economy by analysing the relationship between labour demand and supply, adjusted by real labour costs per unit of output, conventionally used as an indicator of economic competitiveness.

To view the latest LMI graph please visit

In the EU27 as a whole the labour market was expanding throughout 2010. However, the trend has been downward since Q2 2011 – mainly due to the rise of real earnings relative to production.

FedEE is currently closely monitoring both Germany and Spain. Germany is the largest national economy in the EU and Spain the largest of the most troubled Eurozone countries.

The German index began 2010 well above the EU27 benchmark and continued to rise throughout 2010-12, with all variables performing better than EU averages. Moreover, as the log-plot reveals, it has grown at an approximately constant rate, except for the marked deceleration of Q2 2011. By contrast, Spain’s labour market index began 2010 well below the EU-average level and has continued to deteriorate over the entire period. In more detail, as the log-plot highlights, the Spanish index was characterised by the alternation of periods of quasi-zero growth and periods of substantial negative growth rate, such as in Q2 2010 and Q4 2011. This would appear to be primarily due to its poorly-performing industrial sector leading to a sustained decrease in labour demand. This trend was not being driven by a strong surge in real labour costs – as Spanish labour cost and consumer price movements have been generally in line with EU averages.

Speaking at the launch of the new index today Robin Chater, Secretary-General of the Federation of European Employers (FedEE), said that “Looking at unemployment rates alone can often be highly misleading as there is often a lag between job affordability (real labour costs per unit of output) job creation and the filling of new vacancies. The index shows how these fundamentals come together into a true swing of supply and demand. We plan to increase the range of countries covered by the index – but at the outset we thought it would be helpful to focus on two national marketplaces and reveal just how much the Spanish labour market is in an ongoing state of collapse.”

Technical Note

A table showing movements of the index for Germany, Spain and the EU may be viewed at

Metadata about the construction of the index is also provided in notes at the end of the table.

What is FedEE?

The Federation of European Employers (FedEE) is the leading organization for multinational companies operating in Europe. It was founded in 1989 with assistance from the European Commission. It is a corporate member organization current Chaired by the HR Director of Ford Europe.

For further information and comment contact Alison Merrett on 0207 520 9264 or Alison(dot)merrett(at)fedee(dot)com or Robin Chater directly on robin(dot)chater(at)fedee(dot)com

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