Swiss jobless rate hits 20-year low: all good news?

Buzzing: a coworking space in Zurich. © Keystone / Gaetan Bally

Switzerland, like the European Union, has notched up its lowest unemployment rate in decades. How has it managed this, and what does it mean for the economy?

The situation – jobs for everyone?

At 2%, the average Swiss unemployment rate last year reached its lowest level since 2001, when it dipped to 1.7%. Presenting the numbers on Tuesday, the State Secretariat for Economic Affairs (SECO) said the downturn in joblessness affected all regions of the country, all age categories, and both men and women; long-term unemployment also decreased. Previously, the Covid-19 pandemic had driven unemployment up – albeit not astronomically – to a high of 3.2% in 2020 (see graph below).

The trend also corresponds – at a lower level – to what’s going on elsewhere. Yesterday, the Eurostat agency said that unemployment in the 20 eurozone countries (of which Switzerland is not a member) fell to a record low of 6.4% last November – around half of what it was during the bloc’s debt crisis a decade ago. In the US, 3.7% were unemployed in December, while globally, as the Geneva-based International Labour Organization (ILO) said today, unemployment is to rise slightly this year from 5.1% to 5.2%.

Why is unemployment so low?

Job creation in many countries boomed in the wake of the pandemic, and in some industrialised nations the narrative has switched from joblessness to labour shortages (see further below). In Switzerland, the number of open positions leaped by 23% in 2022; last year, although things calmed again, the figure remained much higher than the long-term average. Overall, SECO says the situation is now starting to “normalise” following the post-Covid catch-up. In 2024, it expects a slightly higher unemployment rate of 2.3%.

On Tuesday, SECO economist Boris Zürcher also referred to another factor of the Swiss success: the country’s labour force participation rate of 67% is only surpassed in Europe by the Netherlands and Iceland. Some of this is due to a higher-than-average rate of women in the workforce – albeit many work part-time. Meanwhile, another factor is how Switzerland calculates its jobless rate: by only counting people registered with official employment centres, it arrives at a lower figure than the ILO and Eurostat, which both put the Swiss rate at 4.2% – a bit more normal by European comparison.

Low joblessness – masking problems elsewhere?

Zürcher described the employment situation as “excellent”. Politicians, including Emmanuel Macron in France, have also talked positively about ongoing job creation. However, this is not the whole picture. In the eurozone, GDP growth is stagnating, or even contracting, while government experts in Bern expect the Swiss economy to grow by 1.3% in 2023 and 1.1% in 2024 – well below the average of 1.8% in recent years. The strong Swiss franc is also making life difficult for export industries.

As for Swiss workers: while they might have a job, they have also been faced with rising costs in areas such as health, transport, and housing. Corresponding salary increases have not been seen across the board: last year, effective wages rose in some sectors, but an overall picture is not yet available. In 2022, wage hikes were cancelled out by inflation. And while Switzerland remains one of the wealthiest countries in the world in terms of GDP per capita, charities and researchers warn that more and more people – and not just unemployed – are struggling to make ends meet.

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Demographic trends and labour shortages

For employers, the flipside to the low jobless rate is – as mentioned above – problems finding staff. In Switzerland, a survey by the Manpower group last month showed that while recruitment woes had eased, seven out of 10 companies still found it difficult to fill positions. The most affected branches were IT and data analysis, production, engineering, and operations and logistics, the study found. Employers’ groups and politicians have called for measures to tackle shortages, including tax reforms, the promotion of family-friendly working conditions, or a hike in the retirement age; unions want higher salaries.

However, it’s difficult to fight demography, and the trend is one of ageing: across the EU, the working age population (15-64-year-olds) declinedExternal link by 0.7% in 2021. In Switzerland, labour shortages due to the imminent wave of baby-boomer retirements are set to peak in 2030, with a potential half a million unfilled positions. With immigration and pension reform at the centre of debates about how to tackle such shortages, heated political discussions are likely. As one analyst wroteExternal link this week, politicians might have to start realising that a low unemployment rate is neither the sign of a healthy economy nor a happy voter base.

Edited by Virginie Mangin