Interactive
18 March 2022

COVID-19 upended labor markets around the world. Seemingly innocuous activities like sitting in a coffee shop or riding a bus suddenly became undesirable, with direct implications for baristas, bus drivers, and many others.

With the global economy having a relatively healthy pre–COVID-19 labor market, the immediate impact of the pandemic was remarkably similar across countries. Workers in the travel, hospitality, and leisure industries were the most immediately affected. Most countries quickly adopted emergency measures to soften the impact on the labor market. While developed countries increased government spending to support incomes (at the expense of increasing debt), unfortunately developing countries had less room to do this. A key feature of many labor markets is the uneven impact by gender: In many countries, female employment and labor force participation fell more than male employment.

Two years after the initial shock, some longer-term trends are becoming apparent. As demand for workers continues to pick up, many countries are seeing an increasing mismatch between the skills workers offer and those that employers need, which perhaps might require policy interventions ranging from improving geographic mobility to offering more training programs. As these mismatches in demand interact with longer-standing demographic trends and newer trends for earlier retirement, they will continue to shape the experience of workers and employers for years to come.

Explore key labor market trends across different countries below.

Canada

After losing 3 million jobs at the start of the pandemic, the Canadian labor market rebounded strongly last year, with employment surging above prepandemic levels in September. However, the recovery remains uneven across industries: Employment in educational, professional, and financial services has picked up, while employment in accommodation and food services, transportation, and construction lags.

As 2022 begins, there are two pressing labor market issues to watch for: labor supply and unequal labor market outcomes. The government will need to monitor the lagged recovery for some vulnerable groups; if this recovery doesn’t pick up, policy interventions might be required. The labor market cannot be deemed to be truly recovered if the most vulnerable are left behind.

Germany

The labor market was an important stabilizing factor during the pandemic in Germany. Thanks to a wide range of policy measures, employment was kept largely stable, with positive effects on consumer spending and the economy. The economic outlook suggests that this positive trend is likely to continue for the time being. However, the long-term outlook for the labor market will be shaped by demographic and technological change, with possibly surprising effects: Despite the vast potential for automation, the demand for human work is likely to rise.

India

India’s biggest economic asset is its young population. However, tapping into this demographic dividend has been a challenge. Lack of employment opportunities has been India’s Achilles’ heel for decades. The pandemic has worsened the labor market and made it highly fragmented.

India faces the challenge of creating broad-based jobs—for younger workers as well as across sectors—and the government will have to build both physical and digital infrastructure to create these opportunities. Offering labor-intensive jobs to absorb India’s low- and semi-skilled population will be difficult given businesses’ increasing adoption of labor-saving technologies.

Japan

So far, there are few signs that Japan is experiencing the type of labor shortages seen in Europe and North America. Job openings and wages are lower than their prepandemic levels. However, Japan ended its state of emergency only in September 2021,1 far later than the lockdowns in Europe were lifted. The labor market turmoil associated with the reopening of the economy seen elsewhere has likely only just begun in Japan. Only a few industries had experienced labor shortages as of December 2021, but more may be on the horizon as the economy picks up and demographic challenges persist.

Mexico

During 2020, the temporary or permanent halt of many economic activities led to a sharp drop in the level of employment in Mexico. Mexican labor markets have yet to recover to prepandemic conditions, which has led to the early exit of older generations from the labor force and higher female unemployment. The number of unemployed older adults more than doubled, from 22,200 in Q3 2019 to 44,800 in the same period of 2021.2 As economic activities gradually reopened, workers started returning to their jobs, and, as of Q3 2021, the labor force participation rate stood at 59.6%, very close to the prepandemic rate of 59.9%.3

Spain

Employment levels fell sharply during the COVID-19 recession, but they also recovered much faster than after the 2008 financial crisis. Spain’s employment reached prepandemic levels in less than two years, compared with the 12 years it took after the previous crisis. Employment in the public sector, notably health and education, has contributed to the swift recovery of aggregate employment levels in 2021. Despite the recovery of aggregate employment levels, structural problems persist in the labor market.

United Kingdom

The UK labor market has been resilient during the pandemic. Unemployment rose from 4% before the COVID-19 crisis to peak at just 5.2% in November 2020 and has since fallen back to just above prepandemic levels. Remarkably, the sharpest squeeze in economic activity in more than a century has resulted in the lowest recessionary peak in unemployment in decades. As the economy recovers from a deep downturn, three features of the postpandemic labor market stand out.

United States

Even before Omicron started spreading in mid-December 2021, tight labor market conditions were holding back US job growth, even as the number of job openings remained at or near all-time highs.5 Many employers have been concerned about the scarcity of workers, yet employment remains substantially below prepandemic levels. Something odd is happening in US labor markets—but what?

One issue appears to be a substantial mismatch in the type of workers businesses need and the availability of employees with the skills or interest in taking those jobs. Examining labor force participation by gender and age could provide clues as to what might attract these workers back. A resumption of work-eligible visas might also offer some relief to employers.

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general information

For general inquiries, please get in touch with
Dr. Patricia Buckley. For specific country inquiries,
see listed countries.

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Dr. Patricia Buckley

Managing director | Economics

Deloitte Services LP

pabuckley@deloitte.com

CANADA

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Matthew Stewart

Director | Financial Advisory

Deloitte LLP

mastewart@deloitte.ca

Mexico

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Alessandra Ortiz

Senior economist

Deloitte Mexico

alesortiz@deloittemx.com

Germany

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Dr. Alexander Boersch

Director

Deloitte & Touche GmbH

aboersch@deloitte.de

Spain

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Ana Aguilar

Director | Financial Advisory

Deloitte Spain

aaguilar@deloitte.com.es

India

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Dr. Rumki Majumdar

Associate director | Research and Insights, C&I

Deloitte India

rumajumdar@deloitte.com

United Kingdom

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Debapratim De

Senior manager | Clients and Industries

Deloitte LLP

dde@deloitte.com.uk

Japan

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Michael Wolf

Global economist

Deloitte Touche Tohmatsu Limited

miwolf@deloitte.com

United States

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Dr. Daniel Bachman

Senior manager

Deloitte Services LP

dbachman@deloitte.com

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Endnotes

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  1. Isabel Reynolds, “Japan ends virus emergency nationwide and looks to boost economy,” Bloomberg, September 28, 2021.

  2. INEGI; Deloitte analysis.

  3. Ibid.

  4. National Institute of Statistics; Labor Force Survey.

  5. Unless otherwise noted, all data is from the US Bureau of Labor Statistics.

  6. Canada

    Trend 1: Statistics Canada.

    Trend 2: Statistics Canada; Deloitte analysis.

    Trend 3: Statistics Canada Labor Force Survey.

    Germany

    Trend 1: Eurostat; Deloitte analysis.

    Trend 2: Destatis; Deloitte CFO Survey Germany, November 2021; Deloitte analysis.

    Trend 3: Deloitte analysis.

    India

    Trend 1: Centre for Monitoring the Indian Economy, January 2022.

    Trend 2: Centre for Monitoring the Indian Economy, January 2022.

    Trend 3: Centre for Monitoring the Indian Economy, January 2022.

    Japan

    Trend 1: Association of Job Journals of Japan, accessed via Haver Analytics; Japan Ministry of Health, Labor, and Welfare, accessed via Haver Analytics.

    Trend 2: Japan Ministry of Internal Affairs and Communications, accessed via Haver Analytics; Japan Ministry of Health, Labor, and Welfare, accessed via Haver Analytics.

    Trend 3: Japan Ministry of Health, Labor, and Welfare, accessed via Haver Analytics.

    Mexico

    Trend 1: INEGI; Deloitte analysis.

    Trend 2: Mexico Como Vamos?, January 2022; NACLA, March 2021.

    Trend 3: Deloitte analysis.

    Spain

    Trend 1: EU Labor Force Survey; National Institute of Statistics.

    Trend 2: National Institute of Statistics, Spain; Spain Labor Force Survey, 2021.

    Trend 3: Eurostat/INE Job Vacancy Survey.

    United Kingdom

    Trend 1: Deloitte UK CFO Survey, 2021.

    Trend 2: Deloitte analysis.

    Trend 3: Deloitte analysis.

    United States

    Trend 1: US Bureau of Labor Statistics; Haver Analytics. Note: The relationship between the job-seeking behavior of businesses (in the form of job openings) and the state of the labor market (the unemployment rate) is known as the Beveridge curve. This relationship traces out the tightness of a labor market: Normally as a labor market gets tight, the unemployment rate falls, and job openings increase.

    Trend 2: US Bureau of Labor Statistics.

    Trend 3: US Bureau of Labor Statistics.