The latest labour market data paint a positive picture of employment conditions in the euro-zone. Indeed, in Q1 the level of euro-zone employment finally surpassed its pre-crisis peak. What’s more, growth picked up – both quarterly and annual growth were the fastest since 2008.
But the improving labour market has not yet fed through to much stronger wage growth. In Q1, annual hourly labour costs growth was unchanged at just 1.5%. So wage growth is still far too slow to justify monetary policy normalisation. And even by next year, we think that pay growth will be inconsistent with the ECB’s target of below, but close to, 2% inflation.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services