The pattern of job growth still weighs on productivity

The strong rebound in employment in Spain is driven by sectors with average productivity. At the same time, there is a decline in other sectors that contribute more in terms of productivity. As a result, the post-pandemic labor market growth is hampering potential productivity growth. This conclusion is drawn from a CaixaBank Research report that analyzes its evolution since 2000 and how it is affected by the "composition effect," which measures the increase in productivity based on changes in the weight of each sector in employment, reflecting the movement of workers between more or less productive sectors.

Given the recent market pattern, the "composition effect" is negative, as it has been since 2000. "In all recent expansionary cycles, changes in the employment structure have subtracted some growth from productivity," states the report signed by the entity's senior economist, Oriol Carreras. Between 2019 and 2025, the public administrations, education, and healthcare sectors, which are closely linked to the public sector and have productivity in line with the average, will have a notable increase in total employment. The ICT sector also stands out, and in this case, "productivity is higher than the national average." However, the employment pattern has clear negative effects due to job losses in manufacturing—due to the global recession—and finance—due to consolidations and adjustments—both with "higher" and "higher" productivity, respectively.

As a result, changes in the labor market subtract 0.34 points from productivity growth. If we remove the public sector factor, which is very present in education and healthcare, the impact is 0.22 points. Between 2013 and 2019, the impact of changes in employment on productivity was 0.44 points, and between 2000 and 2007, it was 2.99 points, due to the cycle's link to construction. It's getting smaller, but it's still being subtracted. "The impact is smaller in recent cycles; employment is relocating better than before," Carreras believes. Relocation refers to both the change in employment and the

The report notes that there is no decline in productivity, but there is a drag. Between the fourth quarter of 2019 and the first quarter of 2025, productivity increased by 2.5%, equivalent to 0.5% annually. "It is growing, but it is being prevented from doing so further," the economist comments. Compared to the immediately preceding period, between 2013 and 2019, the annual increase was 0.6%.