August Numbers Show Portugal Adding Jobs Even as Unemployment Ticks Up

For many Portuguese households the latest labour-market snapshot feels like a mixed bag: unemployment nudged up ever so slightly in August even as the overall number of people in work reached its highest level in more than a quarter-century. The new figures, released by the National Statistics Institute (INE), paint a picture of an economy that continues to absorb workers but is starting to lose some of the turbo-charged momentum of early summer.

The post-holiday uptick

A provisional jobless rate of 6.1 % for August means the country added roughly 4 000 unemployed compared with July. Economists attribute the modest rise to the gradual winding down of seasonal contracts in tourism and agriculture once the peak vacation period ends. Last year the same month produced a sharper jump, so the current movement is being read as a normalisation rather than an early warning of trouble ahead. Still, the 0.1-point increase is enough to remind policy-makers that the fight for full employment remains unfinished.

Record employment cushions the blow

Behind the headline, employment continued to climb. The INE estimates that more than 5.0 M people held a job in August, the largest figure since February 1998. Analysts highlight two drivers: a buttressing of industrial exports despite a slowing euro-area economy, and an acceleration in hiring linked to European recovery funds flowing into construction and green-tech projects. This dynamic kept the active population growing while the stock of inactive residents fell to the lowest level since the statistical series began, underscoring a labour market that stubbornly refuses to cool.

Youth joblessness finally retreats

Perhaps the most encouraging detail is the drop in the youth unemployment rate to 18.9 %, the best reading in more than 2 years. Government officials credit programmes such as Programa +Talento and Garantia Jovem for steering thousands of graduates into paid internships that eventually translated into open-ended contracts. Even so, the figure is three times the national average, reminding parents and recent graduates alike that Portugal still faces a structural challenge in giving young talent reasons to stay rather than pursue careers abroad.

Slack beneath the surface

The labour-force data contain a less publicised metric that deserves attention: the 10.4 % work-underutilisation rate. This broader gauge, which lumps together part-timers eager for longer hours and discouraged jobseekers temporarily on the sidelines, rose 0.3 points from July. Rising underemployment suggests that while headline unemployment is historically low, not every contract offers the stability or pay workers need in the face of stubbornly high rents and energy bills.

How Portugal stacks up against Europe

August also saw the euro-area unemployment rate inch up to 6.3 %, meaning Portugal continued to hover just below the bloc average. Forecasts for 2026 from the Bank of Portugal, European Commission and IMF all cluster around 6.3–6.4 %, implying that Lisbon is likely to remain in sync with continental peers. The alignment has an upside: international investors view Portugal as a safe bet within Southern Europe, reinforcing the flow of foreign capital into real estate, tech hubs and renewable energy.

Policy watch: incentives and risks ahead

With growth expected to moderate next year, attention is turning to whether the current arsenal of labour-market incentives will be enough. The government is doubling down on the Contrato-Geração scheme, which rewards firms that hire both a young worker and someone unemployed for more than a year, and on an exceptional measure allowing long-term unemployed to keep part of their benefit when they accept a full-time job. Economists warn, however, that the real test will come when European funds taper off and higher interest rates curb investment appetite. If companies start trimming payrolls, the cushion built in recent quarters could quickly thin.

For now, though, Portugal remains a case study in how a small open economy can generate jobs even as its bigger neighbours falter. Whether August’s small uptick ends up as a blip or the first sign of fatigue will hinge on the autumn hiring season—and on the ability of Lisbon’s policy toolbox to keep the labour engine humming.