Jess Bauldry: According to the latest figures, the Luxembourg unemployment in July was 6.6%. Which sectors or types of work or sectors are most impacted by unemployment in Luxembourg as a direct result of the pandemic?

Joël Machado: I guess the sectors most affected are those that were closed or remained closed longer or had more limitations on their business activities since they were allowed to reopen. Some are still closed: I’m thinking of the night life activities, which can’t work yet. In a sense, construction, in the beginning, but also everything linked to restauration, so food service, hotels to some extent, even though for them it’s more the demand side that’s causing issues. They were hit when lockdown started. When things progressively reopened of those sectors mentioned probably construction could resume more significantly, whereas restaurants had a limitation on the number of people at a table and had to ensure a distance between tables. They had much more limitations.

In terms of the number of people or the rise in unemployment observed at the moment, it’s not so much there are more and more people joining the unemployment pool in the sense people are being laid off. It’s more specific types of workers that have a difficult time to leave unemployment. One category of that is, for example, who were working on interim [temporary agency] contracts when lockdown started. You have a lot of interim in construction, it’s the same for hotel and restauration.

How beneficial has the partial employment state aid been to stave off unemployment?

The government partially or highly subsidised workers during the pandemic confinement months. It’s an important mechanism that avoided people being laid off. It’s difficult to quantify how bad it could have become. One thing is certain, if there weren’t these public policies in place, the number would certainly be worse than now.

One indication that cannot infer the volume of people who would lose their job, but at the height of the pandemic almost a third of the workforce was on chomage partiel [the short-time working scheme]. We see it’s a measure that affected a lot of workers. If chômage partiel were zero, a non-negligible share of those people would probably have lost their jobs. The question would be for how long, because activity resumed. So, it’s not straightforward.

What needs to happen in future to limit the impact of the pandemic on jobs in Luxembourg?

The main trajectory on jobs and economy will happen in terms of confidence and the evolution of the virus. If numbers increase substantially again how will public authorities react? Will businesses have to close? All this will affect whether more jobs are created or waiting to see if health, safety and security prospects improve.

Keeping the virus under control is the priority of the government. The economic situation is linked to the health situation. Monitoring the disease and trying to contain it if problematic sectors or areas become visible is one of the main policy instruments that government has at this moment.

The things that have already been done in terms of trying to help companies in terms of cashflow so they can cover their current expenses, these policies are important to keep activities up and thereby also the jobs.

Luxembourg's job agency Adem announced unemployment was at 6.6% in July 2020. Photo: Matic Zorman/archives

The head of Horesca, the hospitality trade federation, estimates around 20% of restaurants and cafés will go under in the next 9 months. Do you have an forecasts or figures in relation to bankruptcies in Luxembourg?

So far, we’ve not had big waves of bankruptcy--these things take time. It might take companies time to realise in their situation the best option is to file for bankruptcy.

Even if the situation stabilises at current levels, I wouldn’t be surprised to see a surge of bankruptcies toward the end of the year, the beginning of next year because business dynamics might take some time to realise.

What are Liser’s forecasts for employment in Luxembourg this year and early next year?

I can’t provide numbers because I don’t have them at this stage, but the baseline will be that if we manage to maintain the virus somewhat under control there’s no need for a new lockdown, the demand starts to take up progressively which is inline with what [national statistics bureau] Statec foresees and there’s a rebound of economic activity, after this sharp stop we observed at the start of the pandemic with the closing of the businesses, then we would have a drop in GDP but an increase next year. We might not reach the level we would have without the pandemic but there will be a progressive convergence towards a previous hypothetical level.

To what extent will new jobs be created in the short to medium-term in Luxembourg?

What we observe currently is there’s a bit less job creation, compared to the same month in 2019. There’s slightly lower new job openings compared to last year, I think 26% less, even though there are still jobs open. There are more than 7,000 jobs still vacant at Adem at this point. It’s not that no jobs are being created. There might be some shift in the types of companies hiring now compared to what you would observe in an average year without the pandemic. To say this is a long-term structural trend, it’s too early to observe that.