Economic growth and employment in the EU-27: Panel Fourier causality evidence

Jobless growth refers to a process in which economic growth occurs without a simultaneous increase in employment. It has become a concept extensively discussed in economic literature, particularly since the 1990s. This study examines the effects of economic growth on employment and unemployment, using the EU-27 as an example, and tests whether economic growth leads to an increase in employment and/or a decrease in unemployment in the long term. Within this scope, using data from 1991–2024, the causal relationships among economic growth, employment, and unemployment rates were analysed using the Panel Fourier Toda–Yamamoto causality test. This method offers significant advantages over traditional causality tests widely used in the literature, as it accounts for structural breaks and non-linear dynamics in the series. At the panel level, the evidence suggests that growth-driven employment creation is weak and inconsistent, implying that economic expansion does not directly translate into improved labour market outcomes. These results show that the capacity of economic growth to create employment may vary across countries, depending on country-specific structural characteristics, labour market dynamics, and the policy frameworks in place. The study aims to empirically contribute to the jobless growth literature by examining the growth–employment–unemployment relationship from a two-way perspective and highlighting the importance of inclusive, employment-friendly growth strategies for policymakers.