As energy prices remain elevated in Europe, the implications for various industries and employment levels have become increasingly critical.

High energy costs are exerting significant pressure on industries across the continent, with regions such as southern Germany, the Ruhr, and northern Italy particularly affected.

An analysis of firm-level data suggests that a sustained increase of 10% in electricity prices could lead to an employment reduction of up to 2% in energy-intensive sectors.

In the euro area, despite a decrease from their 2022 highs, energy prices still surpass long-term averages and may remain high for the foreseeable future.

The current electricity prices are reported to exceed €100/MWh, having surpassed €190/MWh in some countries, marking a considerable increase from pre-crisis levels.

Factors contributing to these high prices include geopolitical tensions, rising costs of emission allowances, and inadequate investment in renewable energy alternatives.

This sustained elevation in energy prices poses a threat to the competitiveness of European industries, particularly those that are energy-intensive, such as chemicals, metals, and cement.

The challenge lies in the inability of many firms to pass these heightened costs onto consumers without compromising sales.

Consequently, if energy costs persist at these levels, declining sales may lead to job losses, especially in regions dominated by energy-intensive industries.

Analysis of approximately 200,000 manufacturing firms across Belgium, France, Germany, Italy, the Netherlands, and the United Kingdom indicates that every job lost in high-tech manufacturing could trigger further job losses in ancillary local services, with estimates suggesting a ratio of one high-tech job loss leading to the loss of up to five jobs in local services.

Moreover, high energy costs disproportionately affect areas with a concentration of energy-intensive companies.

Jobs directly linked to these industries are at risk, but the repercussions extend to nearby service sectors, illustrating a broader economic impact.

To mitigate these negative employment effects, a transition towards more affordable and cleaner energy sources is necessary.

This process aims to bolster the competitiveness of European manufacturing while preserving jobs.

However, such transitions require time, during which the job market will continue to be impacted.

Historically, transitions in the economy indicate that job losses in specific sectors or regions do not necessarily correlate with an overall rise in unemployment.

Economic flexibility in labor markets allows workers to shift between industries and geographical locations, a process that could help alleviate employment disruptions.

Therefore, effective retraining and mobility support systems are crucial.

The European Commission’s Clean Industrial Deal advocates for harmonizing decarbonization efforts with a fair transition for workers who may find themselves displaced due to these economic adjustments.

Initiatives aimed at economic diversification, job creation in green industries, and worker support are presented as viable strategies to confront the challenges instigated by rising energy prices.

Furthermore, average hours worked in the euro area have been on a downward trend since 2020, remaining below pre-pandemic levels.

Despite a significant increase in employment – approximately 19.9 million more people employed over the past decade – average hours worked per employee have declined.

Economic factors including labour supply and demand shifts contribute to this trend, reflecting broader market conditions.

The factors influencing these changes include variations in employees working long hours, which have decreased significantly in recent years, and the proportion of employees working zero hours, which spiked during the pandemic but has since returned toward historical averages.

Countries like Spain and France continue to exhibit elevated proportions of zero-hour workers due to changes in employment regulations.

For many employees, preferences for long hours are fading, parallel with actual reductions in hours worked.

This decline points towards evolving workforce dynamics and economic demand, presenting additional complexities in understanding labor trends across the euro area.

Overall, the interactions between job losses, hours worked, and energy prices present a multifaceted issue for the European labor market.