Euro area wage growth slows further in fourth quarter

Wages in the Eurozone rose by 4.1% year-on-year in Q4 2024, marking the smallest increase so far this year, compared to a downwardly revised 4.3% rise in Q3.

Euro area wage growth slows further in fourth quarter

Wage growth showed signs of slowing across several sectors, with construction seeing a decline (4.3% vs. 4.8%) and services also easing (4% vs. 4.3%). However, wages in the industrial sector edged higher, growing by 4.7%, up from 4.4% in the previous quarter. Among the bloc's largest economies, wage growth decelerated in France (1.7% vs. 2.7%), Spain (3.2% vs. 4.9%), and Belgium (2.2% vs. 2.6%), while Italy’s wage growth remained stable at 4.3%. In contrast, Germany (4.4% vs. 4%), the Netherlands (6.2% vs. 5.9%), and Ireland (5.4% vs. 5.2%) saw accelerated wage increases.

Euro area labor costs slow

Hourly labor costs in the Euro Area increased by 3.7% year-on-year in Q4 2024, the smallest rise since Q3 2023. This slowdown suggests that the European Central Bank's (ECB) restrictive monetary policy may be having a greater impact on the labor market than previously anticipated. The wage component of labor costs grew by 4.1%, while the non-wage component increased at a slower pace of 2.6%. Among various industries, labor costs rose the least in services (3.7%), followed by construction (4%) and industry (4.3%). This moderation in labor cost growth reflects broader economic trends and pressures from tighter monetary policy, indicating a potential easing in inflationary pressures moving forward.