Labour costs in the eurozone rose by 3.7% year-on-year

According to Eurostat, hourly labour costs in the euro area increased by 3.7% year-on-year in the fourth quarter of 2024. In the EU, the increase was 4.3 per cent. Wages and salaries were the main burden (+4.1% in the euro area, +4.7% in the EU), while overhead costs - social contributions, taxes - grew more moderately (+2.6% and +3.0% respectively).

The highest wage growth rates were recorded in Croatia (+13.9%), Poland (+13.8%), Romania (+13.1%) and Bulgaria (+13%). In these countries, wage growth reflects a catching-up economy and structural labour shortages. Latvia, Lithuania and Hungary also saw double-digit growth.

Interestingly, countries such as Ireland have recorded abnormal spikes in certain sectors - for example, the business sector grew by an impressive 48.3 per cent in the third quarter of 2024. This may be due to skewed corporate reporting, characteristic of economies with a large multinational presence.

While growth remains notable, the rate of increase in labour costs has started to slow down from its peak levels in 2022-2023. In the eurozone, for example, hourly costs rose by 5.1 per cent a year earlier.

In the eurozone, labour in the services sector rose in price by 3.7%, in industry by 4.3% and in construction by 4%. In the EU, the similar figures are 4.2%, 4.9% and 4.5% respectively. This indicates a balanced growth of costs in all sectors.

Rising labour costs continue to be fuelled by a strong labour market and inflation expectations. However, as economists point out, further wage increases will be limited by easing inflationary pressures and a possible cooling of the economy in 2025.