Luxembourg’s unemployment rate increased to 5.9% last month, marking its first rise since the summer, according to the national employment agency, Adem. The rate slightly climbed from 5.8% in November, where it had remained steady between August and October. The unemployment rate crossed 5% in May 2023 and has stayed above 5.5% throughout 2024.
As of November 30, there were more than 18,600 jobseekers registered with Adem, a 6.8% increase compared to the same month last year. This comes just days after the government confirmed support for 74 companies to help cover part of their staff’s wages in January through the partial unemployment scheme, which will remain at the same level as in December.
Under this scheme, businesses can apply for partial unemployment benefits for 20% of employees’ working hours, while the government covers the remaining 80% of wages. The initiative is expected to impact the equivalent of over 7,100 full-time jobs in January, slightly down from 7,355 in December.
Economic Outlook
After experiencing a contraction in 2023, Luxembourg’s economy returned to growth in 2024, though the recovery has been slow and uneven, according to the country’s official statistics agency, Statec. The agency estimates growth for this year at around 0.5%, with expectations for stronger growth in the coming years, reaching more than 2.5% in 2025 and 2.4% in 2026.
This recovery will depend partly on decisions by the European Central Bank regarding interest rates, which are expected to support recovery in the property sector. Additionally, the economic recovery within the broader eurozone should boost Luxembourg’s export revenues while increasing domestic consumer spending.
However, Statec warned that these forecasts are subject to risks. Inflation trends and central bank responses remain uncertain. If interest rates rise more than expected, it could slow the recovery, while a quicker-than-expected decrease in rates could boost growth in Luxembourg.
Luxembourg’s inflation is expected to finish 2024 at around 1%, well below the European Central Bank’s target of 2%, with slow wage growth contributing to this. Statec predicts a slight rise in inflation due to anticipated wage indexation in the second quarter of 2025 and the removal of energy price caps. Eurozone inflation is expected to end next year at 2.1%.
Luxembourg’s employment growth in 2024 is predicted to be 1%, the slowest since 2009, and on par with the EU average. Employment growth is trailing behind population growth, with a continuing decline in the construction sector, though this impact is expected to lessen by 2025.
Statec forecasts that Luxembourg’s unemployment rate will reach 5.7% in 2024, rise to 5.9% in 2025, and then return to 5.7% by 2026.
The country’s green transition efforts are starting to show results in the energy sector, with motor fuel sales down by 4% and heating oil sales dropping by 12%. As a result, Statec predicts Luxembourg’s greenhouse gas emissions will decrease by 4.5% this year compared to 2023.
