By Pawel Adrjan, Reamonn Lydon and Vahagn Galstyan
Key Points:
- Posted wages grew 3.3% in the euro area, 6.1% in the UK and 3.1% in the US in 2024, according to December data from the Indeed Wage Tracker.
- Within the euro area, annual wage growth varied significantly, ranging from 1.8% in France to 6.1% in the Netherlands.
- Projections based on real-time advertised wage data and collective bargaining agreements forecast a slowdown in official Compensation per Employee growth in the five largest euro area countries, from 4.4% in Q3 to 4.1% in Q4 of 2024, close to the European Central Bank’s projection of 4.2% for Q4 2024.
Full-year 2024 data from the Indeed Wage Tracker shows the pace of wage growth is at or near levels consistent with 2% inflation targets in the US and euro area while remaining well above those levels in the UK. In the US, posted wage growth fluctuated in the low 3% range throughout 2024, a rate similar to the pre-pandemic period. In the euro area, posted wage growth gradually declined from the high 3% range at the start of the year to the low 3% range by year-end. Meanwhile, the UK has sustained a much higher rate of wage growth, despite a cooling labour market.
Spotlight: Wage Growth in the Euro Area
While the overall annual rate of euro-area posted wage growth was stable at around 3.3% in the final quarter of 2024, the aggregate figure masks significant variation between countries and industries. Annual wage growth slowed throughout much of the year in France (from 3.4% in January to 1.8% in December), Germany (from 3.8% in January to 2.8% in December) and the Netherlands (where annual growth peaked at 8.2% in June before falling to 6.1% in December). Italy experienced a mid-year pickup in wage growth after delayed collective bargaining agreements were updated, finishing the year at 2.9%. Ireland’s wage growth was generally steady for the year, ranging between a fairly high 4% and 5% and ending 2024 at 4.3%. And in Spain, posted wage growth accelerated throughout the year, reaching 5.0% in December, well above pre-pandemic levels of around 2%, likely boosted by resilient demand for new workers.
In real terms, adjusted for inflation, many euro area countries returned to pre-pandemic posted wage growth rates in 2024. But even though posted wages were growing faster by the end of 2024 than the annual rate of inflation in most countries analyzed, most countries have still experienced notable real wage declines over the longer term, reflecting an incomplete recovery in purchasing power. This longer-term trend is different than trends in both the UK and US, where real posted wages have risen since 2019 despite long periods of high inflation. Worker and union demands for a real wage catch-up are likely one reason why nominal wages are still growing strongly in several euro area countries.
Forecasting Wage Growth in the Euro Area
Understanding wage growth is critical to understanding inflation, and timely data is essential for forecasting. The Compensation per Employee (CPE) data favoured by the European Central Bank (ECB), derived from national accounts data, are released with a significant lag, making it challenging to assess the most recent wage growth trends. The Indeed Wage Tracker provides monthly data at a much shorter lag, offering a timely complement to official statistics.
Official Q4 CPE data will not be released until 7 March 2025, but the more timely signal provided by data from the Indeed Wage Tracker enables us to forecast what we expect that data to show. The table below provides our Q4 forecast for CPE growth based on the Indeed Wage Tracker alone, and the combination of Indeed Wage Tracker and the European Central Bank’s Negotiated Wage Tracker data, respectively. The addition of negotiated wage data has the most pronounced impact in Germany, where negotiated wage agreements tend to include backdated real wage catch-up payments and other one-off adjustments that advertised wages may not reflect. The inclusion of negotiated wage data makes a smaller difference in France, Italy, the Netherlands and Spain.
Our forecast supports the ECB’s expectations of a continued slowdown in wage growth through the end of the year and into 2025. Combining the five largest euro-area economies, our Q4 2024 forecast for year-on-year growth in Compensation per Employee is 4.1%, based on both the Indeed and ECB data, only slightly below the ECB’s euro-area projection of 4.2%.
Conclusion
Because wage growth has the potential to sustain inflationary pressures, wage developments remain a key area of attention for central banks. The Indeed Wage Tracker highlights a gradual easing of wage growth across the euro area, with some variation across countries. Our forecasts suggest growth in Compensation per Employee (CPE) in the euro area decelerated in the last quarter of 2024, aligning with ECB expectations and reinforcing the view of moderating inflationary pressures from wages as we head further into 2025.
Methodology
To forecast euro-area CPE growth, we leverage Indeed Wage Tracker data at the occupational and country levels, identifying an optimally weighted combination of wage trends that closely match historical CPE growth. We also incorporate ECB Negotiated Wage Tracker data for additional accuracy. This methodology has proven effective at tracking CPE dynamics, although pandemic-related volatility driven by government compensation schemes created some outliers in 2020-21.
To calculate the average rate of wage growth in the Indeed Wage Tracker, we follow an approach similar to the Atlanta Fed US Wage Growth Tracker, but we track jobs, not individuals. We begin by calculating the median posted wage for each country, month, job title, region and salary type (hourly, monthly or annual). Within each country, we then calculate year-on-year wage growth for each job title-region-salary type combination, generating a monthly distribution. Our monthly measure of wage growth for the country is the median of that distribution.
Euro-area figures are an employment-weighted average of growth rates in France, Germany, Ireland, Italy, the Netherlands, and Spain. Updated employment weights from Eurostat are applied periodically.
For a detailed methodology, see our research papers, What Do Wages in Online Job Postings Tell Us about Wage Growth? and Quarter-Casting Euro Area Wage Growth. For access to the data, see the Hiring Lab Data Portal.
