Productivity Measurement Analysis series – Euro Area, Q3 2024 by Klaas de Vries.
Labour productivity growth, defined as real gross value added per hour worked, in the Euro Area grew by 0.4 percent in the third quarter of 2024 compared with the same quarter of last year.[1], [2] Growth rates for previous quarters were revised downwards, while the level of labour productivity is slightly revised upwards. These revisions are part of the five-year benchmark revisions process across European Union economies in 2024. Productivity growth is recovering from the negative readings seen throughout 2023.
Table 1. Euro Area (% change)
| (1) | (2) | (3) | |
| Q3/2024 (q/q) | Q3/2024 (y/y) | vs Q4 of 2019 | |
| Real gross value added | 0.14 | 0.9 | 4.8 |
| Persons employed | 0.17 | 0.9 | 4.7 |
| Total hours worked | 0.05 | 0.5 | 3.2 |
| Labour productivity (per worker) | -0.04 | 0.0 | 0.1 |
| Labour productivity (per hour worked) | 0.09 | 0.4 | 1.6 |
Real gross value added, representing the value of goods and services produced minus the cost of inputs, expanded by a very modest 0.14 percent in the Euro Area compared to the previous quarter. This figure however masks an (unusual) high degree of variability among member countries. Spain and the Netherlands are currently the fastest growing among the larger economies, with readings around 0.8 percent higher than the previous quarter. Italy is virtually stagnant, while the German economy continues to decline. France is somewhere in between these economies. The Euro Area economy grew about 0.9 percent compared to the same quarter of 2023, making it very similar to the previous quarters.
Despite very slow growth, the labour market remains relatively strong, with another quarterly gain of about 250,000 workers across Euro Area economies. However, these gains are largely driven by Italy and Spain, whereas, in most other economies, the labour supply seemed to have reached its limits. Average hours worked per worker declined (again), which led to more modest growth in total hours worked. The average hours worked per worker across the Euro Area is currently 1.4 percent below pre-pandemic levels. This could point to continued labour hoarding among employers holding on to hard-to-get workers, while waiting for demand to pick up.
Where does this all leave us in terms of labour productivity? As growth in total labour inputs slows (due to lower average hours worked per worker), labour productivity growth has become a more important driver of modest gains in economic activity. Labour productivity increased by 0.4 percent compared to the same quarter last year, which is better than the previous quarters but still well below the pre-pandemic trend. The level of productivity across the Euro Area has been virtually unchanged after the seesaw pattern during the height of the lockdowns in 2020 and early 2021. Some continued cyclical uptick can be expected in the coming quarters, but the overall demand environment, especially for European exports, remains uncertain, hampering stronger productivity readings.
[1] The Euro Area aggregate is based on data for Ireland that excludes sectors that are dominated by foreign-owned multinational enterprises. These data are used as they represent a more realistic (and less volatile) picture of the Irish economy. The growth rate of Euro Area productivity growth including the total gross value added data for Ireland is 0,5 percent on a year over year basis and 0,3 percent on a quarter over quarter basis.
[2] The official press release can be found here: https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-06122024-ap.
