Introduction to Europe’s Labor Market
During the pandemic, workers across Europe briefly enjoyed rare leverage over their employers. Generous vacation and short-time work programs helped companies offset their personnel costs. Thanks to remote work, offices became optional. Headlines about the so-called “Great Retirement” reflected a global labor shortage that sharply increased demand for talent. Workplace burnout gave rise to another new term: “quiet quitting,” as employees rejected overwhelm in the pursuit of a healthier work-life balance.
Europe’s Labor Markets are Losing Momentum
With the continent’s industrial sector now under pressure, wage growth slowing and artificial intelligence (AI) at risk of replacing human labor, that moment is quickly passing. The European labor market has “cooled” and fewer vacancies and a more difficult economic climate are naturally making workers more cautious about changing jobs. According to the European Central Bank (ECB), the labor market of the 21 member states of the euro zone is expected to grow more slowly this year, at 0.6% compared to 0.7% in 2025.
The Impact of Slowing Labor Markets
Although this decline seems tiny, every 0.1 percentage point difference means about 163,000 fewer new jobs will be created. Just three years ago, the Eurozone created around 2.76 million new jobs while growing at a robust rate of 1.7%. Migration has also played an important role in shaping Europe’s labor supply, helping to alleviate acute labor shortages and promote employment growth in many countries. The migration balance is now stabilizing or declining.
Germany’s Needs Set the Tone
In Germany, more than every third company plans to cut jobs this year. The Bank of France expects unemployment in France to rise to 7.8%, while in the UK two-thirds of economists think unemployment could rise from the current 5.1% to as much as 5.5%. Unemployment in Poland, the European Union’s growing economic power, is rising slightly, reaching 5.6% in November, compared with 5% a year earlier. Romania and the Czech Republic are also experiencing similar increases in unemployment.
New Trends in the Labor Market
The labor market slowdown has given rise to new terms such as the "Great Hesitation," in which companies think twice about hiring and workers are cautious about leaving stressful jobs, and "career cushioning," in which a backup plan is quietly created in the event of layoffs. Some European economies are expected to outperform, with Spain, Luxembourg, Ireland, Croatia, Portugal, and Greece set for another record year of job growth.
The Impact of AI on the Labor Market
Europe has been much slower to adopt AI than the United States and China, held back by lower investment, stricter regulation, and delayed adoption. But that hasn’t eased employees’ concerns that automation will quickly replace humans in the workplace, especially after negative predictions about the impending loss of millions of jobs. A study published in July by consulting giant EY found that a quarter of European workers fear AI could threaten their own jobs, while 74% believe companies will need fewer employees because of the technology.
The Future of Work
In November, the Nuremberg-based Institute for Employment Research (IAB) projected that in Germany alone, 1.6 million jobs could be transformed or lost through AI by 2040. The Federal Employment Agency assumes that highly qualified positions will be disproportionately affected, although around 110,000 new jobs could be created in the technology sector. Enzo Webe, head of forecasting at the IAB, said in the report that AI would lead to a “transformation” of the labor market, but “not to less work.”
Redefining the Meaning of Work
For many European workers, the rapid advance of AI could become just that kind of jolt, a catalyst that prompts them to act preemptively before automation reshapes their roles for them. Anthony Klotz, a professor at University College London who coined the term “Great Resignation,” argues in his upcoming book “Jolted” that quitting a job is less about long-term dissatisfaction and more about sudden moments of clarity. Many tedious tasks can be delegated to AI to free up human labor, but there are good reasons to believe that professional knowledge work will not shrink.
