One of the reasons I do not look at wage growth in the Euro area more often is that the data available is usually well behind the times. But a research paper from the Central Bank of Ireland has brought things more up to date after first agreeing that the official data is less helpful than in might be.
To track wage developments, the ECB uses national accounts data on workers’ compensation and data on negotiated wages, neither of which are perfect. For
example, national accounts data is only available at a considerable lag of 90 days.Negotiated wage data could be more backward- than forward-looking, given the lengthy time periods over which negotiations tend to take place. Finally, negotiated
wages are not available for all euro-area countries.
But for the fact we are looking at Euros I would say that such numbers are a dollar short and a day late.
Instead they have tried this to bring things more up to date.
We track wages posted in job ads on Indeed in six euro-area (EA) countries — France, Germany, Ireland, Italy, Netherlands and Spain — and the UK. When we quote ‘euro-area’ figures, we’re referring to the employment-weighted average of these six countries.
So we have the four largest economies, themselves ( Ireland) and the Netherlands. This means it should be pretty representative.
The euro-area countries account for 81% of total
euro-area employment.
What results did they get?
Wages growth has been picking up.
Our initial analysis, conducted through the end of October 2022, found that growth in euro-area posted wages accelerated sharply in the first half of this year, from 2.5% in January to 4.2% in June and continued to accelerate during the third quarter. The first growth spurt coincided directly with the re-opening of economies after the pandemic. That growth continued in October 2022 — average year-on-year euro-area wage growth in our tracker was 5.2%, more than three times the 2019 average of 1.5%. But not all growth is created equal.
Intriguingly we do have something of a wage-price spiral here as wages have been pulled higher by the rise in inflation. Although care is needed as they have been doing so from below and have never caught up. Nonetheless wage growth has trebled.
I do not think that this is the win that they believe it to be but we should not reject the numbers past on ECB past performance.
This acceleration in wage growth is consistent with ECB expectations for average wages to grow at rates well above their pre-pandemic trend in the near term……
In the ECB September 2022 projections, compensation per employee was projected to grow at 4.8% and 4.0% in 2023 and 2024. This compares with an average annual growth figure for 2017-19 of 2.0%.
We can break that down for individual countries.
Among the euro-area countries we analysed, October
wage growth was highest in Germany (7.1%), followed by France (5.0%), Ireland (4.7%), Italy (4.2%), Netherlands (4.0%) and Spain (3.5%).
As it stands the growth in everywhere but Germany seems to be slowing.
Germany is the one country we studied where year-on-year wage growth has not yet decelerated.
But the growth has broadened out.
Since the low point of the pandemic in early 2021, when posted wages were growing at a rate of 3% or higher in
fewer than 40% of occupational categories in the euro area, the share has broadened to over 60% in October.
There is also something hopeful in the numbers as it looks as though the lower-paid are particularly benefiting from the rises.
The pandemic shifted the landscape. Six categories are in the euro area top 10 in both 2019 and 2022: cleaning and sanitation, food preparation/service, customer service,
loading and stocking, retail and installation and maintenance. Nevertheless, in each of those six categories, wage growth has risen substantially since the pre-pandemic period.
In case you were wondering why 3% growth is being used as a type of benchmark it is because it has become a sort of central bank “castle in the sky”,
A 3% nominal wage growth threshold would be consistent with 1% productivity growth, plus the 2% inflation target (see Lane, May 2022).
Real Wage Growth
If we take these estimates at face value then we immediately have a problem as we note the October inflation figures.
Euro area annual inflation is expected to be 10.7% in October 2022, up from 9.9% in September according to a
flash estimate from Eurostat, the statistical office of the European Union.
So wage growth is lagging inflation by around 5% ( literally 5.5% but I think that is spurious accuracy). If we look at individual situations I fear for the Baltic states all of whom have inflation around 22% and wonder about both wage growth and real wage growth there?
Returning to the countries we do have then for real wage growth we have Germany ( -3.5%), France ( -2.1%), Ireland ( -4.9%), Italy ( -8.6%), Netherlands ( -12.8%), and Spain ( -3.8%)
Poor old Italy! Although in this instance the Netherlands has cruised past it in a race no-one wants to win.
Unemployment
When one is looking at wage growth the unemployment rate provides a perspective. So let us take a look.
In September 2022, the euro area seasonally-adjusted unemployment rate was 6.6%, down from 6.7% in August
2022 and down from 7.3% in September 2021. The EU unemployment rate was 6.0% in September 2022, stable
compared with August 2022 and down from 6.7% in September 2021. These figures are published by Eurostat,
the statistical office of the European Union.
Whilst the situation has improved ( 7.3% a year ago compared to 6.6% now) we are left wondering if this is as good as it gets? But more than that as there were all sorts of theories in the past about full employment ( with implications for wage growth) and NAIRU ( the Rate of Unemployment which gives Non-Accelerating Inflation).
I counsel caution with exact numbers as for both theories they have proven to be wrong. But there are principles behind them and we now have higher wage growth at what are internationally high levels of unemployment. Indeed the comparison between the Euro area and EU is flattered by the departure of the UK.
Comment
The numbers in the research paper add to the debate, But as they stand they confirm one of my 2022 themes which is that real wages are falling substantially with my suggestion being an annual rate of between 4% and 5%. That is the driving force of the cost of living crisis and is putting downwards pressure on economies that will be felt as 2022 moves into 2023.
As to the latest research it will be interesting to see how it stands the test of time but does offer the initial benefit of being more timely. But the number of postings does varying with for example the Netherlands being strong and Germany poor so maybe that has influenced the numbers as some countries may be reading marginal ( likely to be higher) rather than median offerings.
Finally I think the Financial Times will be hoping that this part of its own article gets missed out.
Wage growth has been more modest in the eurozone than in the US and UK, where unemployment rates are lower and post-coronavirus pandemic labour shortages more acute.
Notayesmanseconomics's Blog 
Hi Shaun,
I’ve just found the perfect job for you (and us plebs)
https://apply-for-public-appointment.service.gov.uk/roles
External Member of the Monetary Policy Committee
Bank of England – Monetary Policy Committee
Sponsor department HM Treasury
Location London
Sector Business, Finance & Skills
Skills Business
Number of vacancies 1
Time commitment 3 day(s) per week
Remuneration £159700 per annum
Length of term Three years
Application deadline 11pm on 4 December 2022
Which 3 days?
How many hours per day 6 !
Presumably the remuneration doesn’t include expenses which could include first class travel and chaufer driven limosine.
It doesn’t make any difference which side of the water you live in whether it be the US, the UK or Europe the average workiing class wages failing to keep up with inflation, but the risj getting ever richer more so if they have bought ot own property.
Whether we will see a worldwide slump in property is another matter.
Wow what a find, well done Happening, pure comedy gold here, but you could fill three web pages ripping it apart, so I’ll just show some of the selection criteria for you to amuse yourselves with, as we all know, anyone not a foaming at the mouth Keynsian and MMT’er, a committed believer in the wealth effect from house price inflation, and anyone not prepared to ignore rampant inflation whilst at the same time as inflating house prices and an advocate of endless currency devaluation to support the above, need not apply.
“Strong and proven economics knowledge and skills – candidates must have the technical expertise and experience necessary to make independent monetary policy decisions. Candidates must demonstrate that they have used their economic expertise operating at a very senior level in commercial, retail, business, financial markets, a policymaking environment or academia – as a leader in their chosen profession or field of economics.
Analytical ability – candidates will need to be able to absorb large volumes of complex information and reach reasoned and robust conclusions quickly.
Independence of thought – candidates must be independently minded and be able to exert their influence within the Bank, the MPC and in the wider external policy debate. Candidates must be able to form their own views and decisions.”
Oh my aching sides it goes on……….
“This is a high profile and influential role, requiring strong and proven economic and analytical skills. Candidates must demonstrate that they have used their economic expertise operating at a very senior level in commercial, retail, business, financial markets, a policymaking environment or academia – as a leader in their chosen profession or field of economics.
This role requires outstanding communication skills; candidates must be able to make a strong contribution to the MPC’s communications, explaining policy decisions to the public. Candidates must be independently minded and be able to exert their influence within the Bank, the MPC and in the wider external policy debate.”
You couldn’t make it up.
“Candidates must be independently minded ..”
well that would be a first , I didnt think sheep had independant minds …. empty ones maybe 😉
Forbin
Thank you happening
I have applied in the past but stopped. Mostly the process is only to cover the fact that they have already decided and whoever it is will be “encouraged” to apply.
£160k a year, to come up with an excuse as to why the BOE shouldnt raise interest rates. (or at least keep the rise to a minimum)
And it takes them 3 days a week to do such a thing.
No wonder the technocrats, don’t want to change the status quo.
“It is difficult to get a man to understand something when his salary depends on his not understanding it.”
Upton Sinclair 1878–1968
American novelist and social reformer
but its always the same excuse/s
like they forget they’ve used that one….
Sorry to bring in politics here, especially since it’s more circumstantial proof of corruption, but it has to do with the EU.
Rishi Sunak became PM after BJ pulled out of the race for PM, a race which he would have won, given his continued popularity with the membership.
Rumours did the rounds of him failing to raise enough parliamentary support, but these were quashed Graham Brady MP (Chairman of the 1922 committee).
Boris Johnson seemed so keen on a comeback, that he came back from his Caribbean holiday to take part.
Next we know, he has pulled out of the race, citing the possible loss of £10m a year “earnings” if he stood & lost.
Why would this be the case; it would surely be just another twist in his incredible biography?
I suggest that it was the elites who wanted Sunak, & so threatened Johnson with the loss of a huge part of his corrupt, post-career sinecures if he did not withdraw.
The elites are circumventing democracies at every turn.
“Markets Didn’t Oust Truss. The Bank of England Did.
Analysis by Narayana Kocherlakota | Bloomberg . . .
The way the Truss government collapsed should concern all who support democracy. The prime minister was seeking to fulfill her campaign promises. She was thwarted not by markets, but by a hole in financial regulation — a hole that the Bank of England proved strangely unwilling to plug.”
https://www.washingtonpost.com/business/markets-didnt-oust-truss-the-bank-of-england-did/2022/10/26/dd92c4d2-54eb-11ed-ac8b-08bbfab1c5a5_story.html
Just confirms what I wrote on here a couple of weeks ago about the Truss/Kwarteng partnership taking the blame for the Bank of England’s incompetence and corruption, but I’m sure it was explained to Liz she was lucky to come out of it with a £115,000 pension for life for a month’s work, what was she going to do? keep fighting an unwinnable battle against the attack dogs of the MSM, the globalists and her own party?, or take the money? Matt Hancock came to the same conclusion when taking the money to join I’m a celebrity, reputedly £400,000. Why not Google Kanye West’s recent de-platforming and cancelling by sponsors to see what happens when you take on these people.
These people have got more money than governments, control the MSM, the legal system, the financial system and the politicians so how can they be stopped when the politicians can be bought for what amounts to then little more than pennies?
Absolutely no surprise to me, the confirmation that Johnson had done his job for the globalists came when I heard he got paid $150,000 for a speech, this is how these traitorous scumbags get rewarded – no questions asked after betraying their country and their people, the Clintons were broke prior to gaining power and yet now as a result of the Clinton Crime Syndicate – sorry -Foundation – are worth hundreds of millions of dollars – no questions asked(don’t start me off on all the people associated with them that have mysteriously died):
https://www.theguardian.com/politics/2022/oct/12/boris-johnson-colorado-speech-questions-rules
Politicians never used to come out of politics with much money unless they were wealthy to begin with but Blair started that with his multi millions worth since and everyone else now sees politics as giving them a golden card.
Some people are putting pressure on Trusless not to take her pension but I suspect we won’t know whether she does take it or doesn’t, I dont know whether it can be reveiled uder freedom or infprmation but I for onw don’t think she should take the pension for life for a months work it surely cannot be right.
Its immoral in fact when some people lose their jobs for no fault of their own and only get a few weeks redundancy.
The rules on these things need rewriting after her failure. Regardless of whether it was the BOE or the markets I didn’t think much of her budget wbich would have made the rich even richer.
Thank you Shaun For all of this information.
The difference between the EU countries regarding inflation,unemployment and wage rises and the vast support given by Germany and France demonstrates the EU is clearly not a true Union.
Hi Midge
You are right that it is something of a halfway house. At some point they will address the issue of losses at the ECB and the ESM ( although the latter keeps kicking Greek bonds into the future) and the issue that there are many treasuries rather than just one will return.
NEVER surrender!!!!
If no-one sees a hurricane, does it exist?
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