05/05/2016 Publication
Wage growth has remained relatively low in the euro area despite an
environment of improving labour markets. I
n the fourth quarter of 2015, growth in
compensation per employee stood at 1.3% in year-on-year terms, being one of the
lowest figures registered since the start of monetary union. The growth in negotiated
wages is more robust, but also registered historically low figures in 2015. At the
same time, the unemployment rate, while still high, has been declining since the
second quarter of 2013, indicating a reduction in the amount of slack in the labour
market.
Wage growth has not only been low, but also
consistently over-predicted. Chart B depicts
forecasts for growth in compensation per employee
during different Eurosystem/ECB staff projection rounds
since 2013. The forecasts for growth in compensation
per employee (shown by the shaded grey lines) lie
above the realised outcomes (shown by the black line).
This pattern indicates that the actual growth in
compensation per employee surprised on the
downside.
Negative forecast errors in the growth of
compensation per employee have been
accompanied by positive errors in employment
growth (see Chart C). Indeed, employment growth has
been stronger than expected in recent quarters, and the
unemployment rate has declined at a faster pace than
projected. The positive surprises in employment growth
and the higher than expected wage moderation could
both be partly related to structural labour market reforms aimed at increasing labour
market flexibility and reducing nominal rigidities.
Read here full REPORT
page source http://www.ecb.europa.eu/
Directorate General Communications
Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany
Tel.: +49 69 1344 7455, E-mail: media@ecb.europa.eu
Website: www.ecb.europa.eu
