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Decoding Portugal's Employment Paradox: Record Highs Amidst Persistent Unemployment

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BNN Correspondents
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Unraveling the Employment Enigma

In the wake of the pandemic, Portugal's employment scenario presents an interesting paradox. Despite the near-constant unemployment rate of around 6%, the country has recorded a historically high number of employed individuals, totaling nearly five million. This has led to claims by Fernando Medina, the Minister of Finance, that Portugal is experiencing "full employment."

Yet, these assertions raise questions, particularly when there are still 295,000 unemployed individuals in the country, and the youth unemployment rate stands at 17%. Economists, conversely, refer to this situation as the "natural rate of unemployment," a term denoting the level of unemployment an economy can sustain without causing labor market imbalances. The contrasting views on Portugal's employment state underline a notable discrepancy between the government's claim of "full employment" and the persisting unemployment figures.

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Delving into the Data

When scrutinizing the INE Employment Survey, Portugal's resident population stood at 10,301,500 in the first quarter of 2023, with a 0.5% increase in the population in employment compared to the same period of the previous year. However, the labor underutilization rate remained at 12.5%, with 40% of this figure corresponding to underemployment among part-time workers and inactive workers available for work but not seeking a job.

Unemployment continues to affect women more (7.5%), while youth unemployment (16-24 years) fell slightly to 19.6%. Long-term unemployment accounts for 36.5% of the total. In terms of new forms of employment, remote working practices increased significantly during the pandemic, accounting for 19% of the total employed population in the first quarter of 2023.

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(Read Also: Independent Union of Doctors Extends Regional Strike in Portugal)

Exploring the Employment Services Statistics

As of May 2023, the number of unemployed people registered with the employment services in Portugal stood at 285,855, a decrease of over 10,500 compared to May 2022. Of these, 44% were men, 56% were women, and 39.8% had been registered unemployed for over a year.

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Almost 14.5% of people registered unemployed in mainland Portugal were foreign nationals. Over 60% of foreign nationals registered unemployed were from Portuguese-speaking countries, notably Brazil, Angola, Cape Verde, and Guinea Bissau.

(Read Also: Portugal Court of Auditors Calls Out Madeira Government for Financial Mismanagement)

Industry Insights

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The first quarter of 2023 saw just 2.9% of the in-work population employed in agriculture, livestock farming, hunting, forestry, and fishing. Manufacturing, construction, energy, and water accounted for 25.1% of jobs, while 72.1% of people worked in the services industry. Portugal continues to shift toward tertiarisation and digitization, with a particular emphasis on vehicle trade and repair, health and social support services, and education.

The hotel and restaurant industry, which represents 9.1% of all employment in the services sector, was among the most affected in the last 2 years but appears to be recovering, recording a 21% growth this quarter compared to the first quarter of 2022. Administrative activities and support services also grew by 10%.

(Read Also: Portugal’s Health Minister Launches Comprehensive Plan to Aid Smoking Cessation)

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The Long-Term Unemployment Conundrum

Despite these figures, Portugal continues to grapple with high rates of long-term unemployment. During the first three quarters of 2022, the long-term unemployed, i.e., those who had been out of work for a year or more, and the very long-term unemployed (more than two years) represented 46.4% and 29.4% of the jobless population, respectively.

The Bank of Portugal suggests that the mismatch between the skills which companies seek and those possessed by candidates may explain the coexistence of high long-term unemployment with the high number of vacancies. This mismatch could also be a consequence of long-term unemployment leading to an erosion of human capital in the form of a loss of skills among the unemployed.

In conclusion, Portugal's employment scenario is a complex interplay of factors, including skill mismatch, long-term unemployment, and changing industry trends. While the country celebrates its record employment highs, it must also address the persisting unemployment figures to achieve a truly balanced labor market.

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