Istat scenarios

From construction to services: the sectors affected in the employment slowdown

In recent years, the employment rate in Italia has increased (partly because the inactive have increased), but a slowdown is expected in the coming months

by Rome Editorial Staff

6 June 2026

3' min read

Translated by AI

Versione italiana

Key points

The current picture
Construction sector also penalised by the end of building bonuses
The consequences of falling consumption
Also manufacturing
The forecast

3' min read

Translated by AI

Versione italiana

That the protracted war in the Middle East is bringing an increasingly heavier bill to the Italian economy is now a fact. Among the various institutions, Istat has also said so, providing results that are already consolidated and others that, instead, come from possible scenarios. In the last few hours, the Institute has made a new update and this time, in addition to GDP, it has spoken of employment forecasts. Which are gloomier than in the past.

The current picture

Let us start by saying that the note refers to the two-year period 2026-2027 and that Italia, in recent months, has seen a significant increase in the employment rate (which still remains among the lowest in the EU) and at the same time a decrease in the unemployment rate. It must be said that this double trend has also been conditioned by the increase in inactives, i.e. people leaving the world of work (not even looking for work) and thus increasing the ratio of the employed to the labour force and decreasing that of the unemployed to the labour force.

In the first quarter of 2026, while employment increased on a trend basis by 67,000 and unemployment fell by 110,000, inactivity increased by 44,000, with the rate rising to 33.7 per cent. The April 2026 figure offered temporary relief: employment rose again by 0.5 per cent compared to the previous month, with 123 thousand more employed, bringing the rate to 63.1 per cent. Unemployment fell to 5.1 per cent.

Construction sector also penalised by the end of building bonuses

Of the sectors under observation, construction is the most vulnerable. In the first quarter of 2026, the sector's added value contracted by 0.3% on a cyclical basis. The reasons for this are multiple and add up: the gradual exhaustion of incentives linked to building bonuses, the slowdown of Pnrr construction sites in the second half of the year, and rising energy and financial costs. Companies in the sector express the most marked deterioration in employment expectations, and the climate of confidence continues to deteriorate.

The ISTAT note predicts a 'sharp contraction' in investment in the second half of 2026, due to the reduction of public incentives and rising costs. Construction, which has historically been sensitive to fiscal policy stimuli, will pay the highest price for the withdrawal of these supports. In 2027, the annual investment figure will still suffer from the negative carry-over effect of the 2026 tail.

The consequences of falling consumption

Then there are services, which have been the main driver of Italian employment in recent years. The tertiarisation of the economy has created jobs in sectors such as tourism, catering, business services and logistics. But in the first quarter of 2026 the added value of services held up (+0.4% cyclically), with some positive peaks in communication and information (+1.1%) and real estate activities (+1.3%). But financial and insurance activities contracted by 1.3%.

The channel through which the crisis is transmitted to services is mainly that of consumption. Italian households, squeezed between declining real wages due to the effect of inflation - the private consumption deflator is expected at 2.9% in 2026 - and a still fragile climate of confidence, are reducing their propensity to spend. Private consumption growth is expected at 0.6 % in 2026, compared to 1.1 % in 2025. For consumer services, including trade, hospitality and leisure, this translates into less sustained demand.

Also down in manufacturing

In the first quarter of 2026, manufacturing recorded a zero change in added value, with industry in the narrow sense barely positive (+0.1%). Employment expectations in the sector worsened in May, in line with the trend in foreign demand.

For manufacturing, which is heavily dependent on international markets, there is therefore a phase of cyclical weakness linked to the slowdown in global trade. Businesses are lowering their production expectations, and this is being reflected in labour requirements. The drop in the vacancy rate - to 1.7 per cent in the first quarter of 2026, down 0.1 points from the previous quarter - is the clearest statistical sign of this lower demand for labour.

The forecast

In the ISTAT forecast framework, however, the labour market slows down but does not collapse. Labour units will grow by 0.7% in 2026 - after 1.3% in 2025 - and by 0.4% in 2027. The unemployment rate will continue to improve slightly, falling to 5.5 % in 2026 and stabilising in 2027. Contractual hourly wages are still growing (+2.6% trend in Q1 2026), but the rate is decelerating from +3.9% in Q1 2025.