Hours worked to resume growth in 2021 – CBM

While the number of jobs is expected to continue to grow, the number of hours worked is projected to resume growth in 2021, according to research published in the Central Bank of Malta’s Economic Projections for the 2020-2023 period.

The bank said that jobs are projected to increase by 0.5% in 2021, as are total hours worked.

By 2022, employment growth is expected to be 2.2%, a much lower growth than that envisaged for GDP because despite the impact of the pandemic on output, employment is estimated to have continued to increase somewhat in 2020. Meanwhile, total employment hours are projected to rise by 5.3%, driven by an increase in both headcount and a return to working hours that are more in line with those seen before the pandemic.

The bank estimates that employment is set to rise further by 2.7% in 2023 – still significantly below the projection for GDP growth – as firms continue to recuperate recent losses in productivity.

These losses in productivity arose because in spite of the sharp decline in economic activity in the first three quarters of 2020, the Maltese labour market showed a high degree of resilience, with the number of jobs increasing in 2020 over 2019.

Employment grew at an average rate of 4.3%, when compared with the same period of 2019.

There were a number of factors, which contributed to this, ranging from government wage support, to schemes helping businesses with cashflow problems.

The way in which the market adapted during the pandemic and in previous recessions could also indicate that Maltese firms, supported in part by government intervention, as well as trade unions, tend to prefer reducing the hours worked rather than lay off workers.

Indeed, total hours worked went down by 7.4% on average during the first three quarters of 2020, when compared with the same period in 2019. Although they bounced back somewhat in the third quarter, they remained well below their levels in the corresponding quarter of 2019.

Average hours worked are projected to return to historical levels in 2023, by when total employment hours are projected to rise by 3.4%.

According to the publication, the economy is forecast to grow by 5% this year, following the projected decline of 8.2% in 2020. GDP growth is then projected to rise to 5.5% in 2022 and slow down to 4.7% in 2023.