OECD Employment Outlook 2026

OECD labour markets have continued to show resilience over the past year, but there have been new signs of weakening with a slowdown in the growth in employment and labour force participation. The average OECD unemployment rate remained relatively stable at 4.9% in May 2026, with around two thirds of OECD countries seeing a slight increase. The average employment and labour force participation rates in the OECD remained at or close to record levels, reaching 72.1% and 76.7% respectively in Q1 2026.

Young university graduates are also at an increasingly high risk of unemployment compared to other workers, a rising trend that began well before the spread of generative AI models, suggesting more complex root causes.

Where people live shapes their job opportunities, career progression and living standards. Large regional differences within countries carry real economic costs, as underperforming regions fail to reach their potential. They also threaten social cohesion when people feel, and often are, falling behind those in more prosperous areas.

In over half of OECD countries, employment rates across small regions vary by more than 20 percentage points. Crucially, differences in local population characteristics explain only half of this gap at most, with the rest reflected by what places themselves have to offer. The same worker, with the same qualifications, faces a very different labour market depending on where they live.

Trade shocks also hit people, places and firms very differently depending on the types of businesses and industries in each area. Workers who lose manufacturing jobs rarely move into the new roles created in services, with these jobs often going to younger people entering the workforce. 

Real wages have been growing, but less than they were a year ago. Annual real wage growth was 2.2% in Q1 2026 on average across countries, compared with 2.7% in Q1 2025. Yet even before the recent surge in energy prices, real wages had not caught up with the 2022 spike in inflation in many countries. 

Non-compete clauses are one factor that may be holding back wage growth. Non-compete clauses are widespread across OECD countries, preventing workers from joining or starting competing firms. With about 30% of employees bound by such clauses across 15 countries, they limit workers’ outside options, thereby weakening their bargaining power and reducing wage growth.