The employment market in Luxembourg has slowed for the first time in 15 years

There were 487,109 salaried workers in Luxembourg at the end of 2024, according to statistics office Statec, but at just a 1% increase on the previous year job growth that has not been slower since 2009, Idea Foundation said in its annual report.

“We already saw the start of a slowdown in 2023, but this accelerated in 2024,” said Ioana Pop, an economist at the Idea Foundation, a think tank within the Chamber of Commerce. “While employment is still growing in Luxembourg, it has slowed considerably. While it rose by an average of 2.9% a year between 2013 and 2023, it was limited to 2.1% in 2023, before plummeting to 1%.”

For Pop, the reasons for the slowdown are essentially sectoral.

Whereas between 2014 and 2019, the non-commercial sector (which includes government, charities, the education and health sectors) contributed around 20% to employment growth, in 2024 its contribution had risen to 77.4% (almost 4,500 jobs). The commercial (for-profit) sector largely stalled by 2024, with 22.6% of jobs created (a total of around 1,300 positions).

Construction, finance and IT in decline

“It is the construction sector, which accounts for almost 10% of employment in Luxembourg, which has seen the biggest decline, with a fall of 4.8%, or around 2,500 jobs compared to 2023,” explained Pop.

Another important area that has seen slower growth is the finance and insurance sector: “It accounts for around 11% of the total employment market, and recorded growth of just 1.3% in 2024,” Pop said.

The slowdown follows on from 2023, which had already seen a slight cooling off, as growth fell from 3.5% to 2.9% since 2022.

Ioana Pop, economist at the Idea Foundation.  © Photo credit: D.R.

The slowdown follows on from 2023, which had already seen a slight cooling off, as growth fell from 3.5% to 2.9% since 2022.

Perhaps most striking is the hole that has appeared in another sector increasingly crucial to the economy: IT.

The IT market is usually very dynamic (+3.5% employment in 2022 and +3.9% in 2023) but stagnated – even showing a slight recession – in 2024 (-0.1%). “It still represents 4.5% of jobs in Luxembourg,” said Pop.

It is easy to make a connection to the latest Adem lists of occupations in short supply, she believes. These lists include a number of occupations related to the IT sector. In other words, there might be vacancies, but companies don’t fill them.

Jobseekers with more qualifications

There may be a link between the slowdown in hiring seen in the financial centre and the IT sector, and another feature of Idea’s annual digest: the sharp rise in the number of jobseekers with higher education qualifications.

While the number of jobseekers with a lower secondary diploma (+2.1%) or an upper secondary diploma (+6.2%) has risen in 2024, these increases remain well below the 15.2% seen among people with a university degree (or equivalent).

“A mismatch between the skills of these graduates, on the one hand, and those sought by employers, on the other, does indeed seem to be one of the reasons for this sharp rise,” said Pop.

She also sees two other possible factors: “The fact that the proportion of the resident population of Luxembourg with a higher education qualification has risen (to 45.5%) and a number of people are currently looking to retrain for a new career.”

At the same time, Luxembourg has a much lower employment activity rate among senior citizens (i.e. those aged 55-64) than its European neighbours. This can be explained in part by Luxembourg’s generous pension system, but also, once again, by a concern about skills. “The skills of many older people have become obsolete in the face of changes on the labour market,” said Pop.

The skills mismatch is likely to get worse if it is not addressed. More than ever, therefore, it is essential to invest more in continuing training, to adapt these skills to the needs of the market, the think tank said.

More than 20,000 inactive people wanting to work

Some 20,475 people were registered in Luxembourg as being inactive but wanting to work in 2024. This group is not included in official unemployment figures, but is made up of those who may be undergoing training or be unfit for work due to their state of health. These are people who are not necessarily actively seeking employment, but who could constitute a pool of potential workers.

Artificial intelligence

Change continues apace as Luxembourg is increasingly turning towards digital technology and innovation. These are high value-added sectors, but they need a highly skilled workforce in areas that are often specialised.

Luxembourg is not alone in investing in these sectors, nor is it the only European country to see a slowdown in its employment market. “We know that artificial intelligence could reshape the labour market, but it’s difficult to say today whether the slowdown we’re seeing could come from there or not. Many studies dealing with the impact of AI on the world of work tend to reveal contradictory results at the moment,” said Pop.

What seems more certain, however, is that “we need to adapt to current changes, such as AI. Those who fail to do so run the risk of not being able to keep their heads above water.”

Statec is forecasting a timid recovery in the employment market in 2025 (+1.4%), before a return to 2.2% in 2026.

(This article was first published on Virgule.lu. Translated using AI, edited by Alex Stevensson.)