The fall of 2025 brought an obvious shift in the European labor market. After years of falling unemployment, the current scale and speed of change has become a concern for analysts and policymakers. The three largest European economies, the UK, Germany and France are simultaneously showing similar signs of employment decline.
What is the cause of rising unemployment, what are its consequences and what are the scenarios for its development in the coming year.
In the eurozone as a whole, the unemployment rate in September 2025 remained at around 6.3%, while the unemployment rate in the EU stood at 6.0%, up from 5.9% in September 2024. Eurostat estimates that in September 2025 there were 13,246 million unemployed in the EU, of which 11,003 million were in the eurozone.
Compared to August 2025, the number of unemployed in the EU increased by 63 thousand, and in the eurozone – by 65 thousand. Compared to September 2024, the number of unemployed in the EU increased by 227 thousand. and in the eurozone – by 187 thousand. people. This dry statistic shows a growing number of people out of work, families that are losing their usual economic cushion and social stability.
For individual countries, the picture is as follows. In the UK, official ONS statistics for November 2025 show an increase in unemployment to close to 5% and a significant reduction in the number of workers on payroll. In Germany, specialists of the Federal Employment Agency note an increase in registered unemployment to about 6.2-6.3% and a five-month drop in employment. In France, INSEE reports a rise of ILO unemployment (defined by the International Labour Organization as a proportion of the workforce that has no job but is ready for work and actively seeking it) to 7.7% in the third quarter of 2025. These figures are not mere numbers, but a reflection of the fact that a weaker economy generates less demand and further growth in the number of unemployed.
The investigation shows that rising unemployment is not the result of a one-off shock, but a combination of several factors that mutually reinforce each other and shape adverse labour market dynamics.
Above all, macroeconomic cooling and falling demand play a significant role. After a period of high inflation and subsequent tightening of credit policy, the EU and UK economies have entered a phase of slowdown. The companies have become more cautious in their investments, have suspended staff expansion and optimized expenses. This is a reflection of the classical cyclical mechanism. However, in 2025 it is unfolding against a background of deeper structural shifts, making the impact particularly noticeable.
Rising employer costs and fiscal uncertainty were just as important. In the UK, decisions that put more pressure on business, including changes to the tax system and additional social commitments, had a noticeable impact.
As a result, employment has begun to decline in a number of industries. In Germany and France, the combination of high energy costs and corporate expenses has exacerbated the situation, reducing companies’ profitability and their willingness to hire new employees.
The continuing pressure of inflation, rising costs and disruptions in supply chains also play a role. The increase in production costs reduces consumer demand and slows down investment activity, which is particularly painful in sectors with low margins, such as retail trade, hotels and industry. Here, companies are forced to resort to downsizing in order to stay afloat.
Complementing the picture is a structural skills gap that is growing with digitalization and the introduction of artificial intelligence technologies. The demand is increasingly shifting towards highly qualified professionals able to work with new systems and technologies.
At the same time, a large proportion of workers who have lost their jobs in traditional sectors do not have the necessary skills, which is why the number of unsuitable applicants is increasing. This imbalance is becoming a long-term problem: vacancies are open, but there are not enough candidates to fill them. The Organization for Economic Cooperation and Development in its 2025 report stresses that technological changes and demographic trends are only deepening this gap.
Thus, the rise of unemployment in Europe is a complex phenomenon in which cyclical, structural and political-economic factors intersect, creating steady pressures on the labor market.
At the individual level, rising unemployment means a loss of stable income, growing debt and deteriorating mental health. These social effects, which slowly but surely turn into political ones. Young people and the long-term unemployed are particularly vulnerable.
So in the UK, the number of NEETs (engl. Not in Education, Employment, or Training – an informal term for young people who are simultaneously not working, not studying and not undergoing training) is approaching a critical level, This has already led to the launch of special review commissions and support programmes, but so far the impact is limited. Economically, rising unemployment creates the risks of a «vicious circle»: falling incomes – falling consumption – new reductions. Countries’ budgets are suffering a double blow, as incomes fall and expenditures on benefits and social programs rise. Politically, this increases the pressure on governments and changes the priorities of economic policy in terms of rising expectations for fiscal easing or a realignment of employment support measures.
Analysts and international organizations propose three main scenarios.
The first one is characterized by «soft» stagnation. The most likely short-term scenario is that unemployment will stabilize at a new, slightly elevated level (in the eurozone around 6-6.5%, particularly – Britain ~5%, France ~7.7%) and will hold until demand stabilizes. This option assumes no deep structural shocks, but a protracted recovery.
The second scenario is less optimistic and predicts an increasing deterioration. If energy prices continue to rise, a new phase of global recession, or a policy error (sharp fiscal tightening), unemployment could soar above current levels, adding to the debt and social burden on governments.
Structural redistribution in the labor market may be a key way to mitigate rising unemployment, but it requires significant investment and time. Some positive signals are already emerging in countries where there is a focus on active learning. For example, retraining programs in the field of «green» energy allow parts of workers of coal and metallurgical industry to move into segments of service wind and solar generation. In Germany, such initiatives are helping former employees of traditional industries to acquire the skills of energy storage technicians or automated line operators.
In France, digital skills courses are being actively developed – from basic data analysis to working with industrial AI modules.
In part, it helps to employ people in the retail and logistics sectors where automation has led to job cuts. In the UK, the demand for cybersecurity, cloud management and AI development is growing faster than the market can prepare people, so public and private training programs are aimed at engaging unemployed people in these new professions.
However, even successful examples of requalification show that the process of structural redistribution takes time and coordination between government, business and educational institutions. The Organization for Economic Cooperation and Development (OECD) emphasizes that it is active employment policies, in particular investment in training, encouraging companies to accept employees from risk groups and creating flexible training paths, Reduces the likelihood of temporary unemployment becoming chronic and helps mitigate long-term risks to the economy.
The investigation shows that the blame cannot be shifted to one factor. Responsibility lies with business, the state and the workers themselves. Business must adapt hiring models and invest in training, the state – balance fiscal discipline and demand support, strengthen retraining programs, and improve labor exchanges. Educational institutions must respond more quickly to market needs.
