Filenews 17 January 2026 - by Theano Thiopoulou
There are companies that are reducing employees and those that are "storing labour", expecting that market conditions will improve and this will force them to hire later.
The different trends that exist in Eurozone businesses are recorded in the latest economic bulletin of the European Central Bank (ECB) and as it is characteristically stated "businesses that have faced adverse shocks in their business activity can decide either to reduce their workforce or to maintain it, i.e. to "store labour".
In summary, labour accumulation (greater availability) and business expectations (for hiring/growth) are closely related elements that the ECB monitors to understand the economic path, especially in times of volatility.
The ECB's labour hoarding indicator uses data from the euro area survey on business access to finance to calculate the proportion of firms that have not reduced their staff (employment margin) despite the recent deterioration in their business environment.
The analysis notes that the phenomenon of temporarily retaining redundant staff took on significant proportions in 2022, after the energy crisis. While the index has gradually declined after a period of high inflation (which peaked at around 30% in the third quarter of 2022), it remains higher than its pre-pandemic average (13%). In the third quarter of 2025, 17% of businesses decided to temporarily retain redundant staff.
The authors of the analysis proceed to categorize businesses into three groups: businesses that did not report a deterioration in their business environment in the recent past (maintaining the current situation – business as usual), businesses that were faced with adverse disruptions, but did not reduce their staff (Temporary redundant staff retention – Hoarding labour) and businesses that experienced adverse disruptions and reduced the number of their employees (staff reduction – Shedding labour) in the last quarter of 2025.
Each team perceives differently how their business activity will evolve, which will also have an effect on employees. Businesses in the "status quo" category do not expect a deterioration in their sales or investments in the next three months. Businesses in the other two categories expect a decline in sales and investment, but those that retain their workforce tend to be less pessimistic about the near future compared to businesses that lay off workers.
This shows that decisions about whether or not to retain employees depend on companies' expectations of the business environment in the future, at least in the short term.
The ECB's analysis states that regardless of the decision to accumulate labour, firms affected by the deterioration in their business activity do not expect to be able to raise their prices as much, implying weaker demand for their products or stronger competitive pressures.
Their reduced pricing power – while wage growth remains the same – could erode profit margins, forcing these businesses to explore other ways to reduce their labour costs, the economic bulletin analysis notes.
