That the prolonged war in the Middle East is taking an increasingly heavy toll on the Italian economy is now a fact. Among various institutions, Istat has also stated this, providing already consolidated results and others that, instead, come from possible scenarios. In recent hours, the Institute has provided a new update and this time, in addition to GDP, it has spoken about employment forecasts. Which are gloomier than in the past.
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The current situation
Let’s start by saying that the note refers to the two-year period 2026-2027 and that Italy, 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 dual trend has also been influenced by the increase in inactive people, i.e., people who leave the world of work (they don’t even look for a job) and therefore increase the ratio of employed people to the workforce and decrease the ratio of unemployed people to the workforce.
In the first quarter of 2026, while employment increased by 67 thousand units year-on-year and unemployment fell by 110 thousand units, inactivity grew by 44 thousand units, with the rate rising to 33.7%. The April 2026 data offered a temporary reassurance: employment returned to grow by 0.5% compared to the previous month, with 123 thousand more employed people, bringing the rate to 63.1%. Unemployment fell to 5.1%.
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The construction sector also penalized by the end of building bonuses
Among the sectors under observation, construction is the most vulnerable. In the first quarter of 2026, the sector’s added value showed a contraction of 0.3% on a cyclical basis. The reasons are multiple and cumulative: the progressive exhaustion of incentives related to building bonuses, the slowdown of Pnrr construction sites in the second half of the year, and the increase in energy and financial costs. Companies in the sector express the most pronounced deterioration in employment expectations, and the climate of confidence continues to worsen.
The Istat note predicts that in the second half of 2026 there will be a “sharp contraction” in investments, due to the reduction of public incentives and the increase in costs. Construction, historically sensitive to fiscal policy stimuli, will pay the highest price for the withdrawal of these supports. In 2027, the annual investment data will still reflect the negative carry-over effect from the end of 2026.
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