German Labour Costs up 2.1% Q/Q in 4Q as Hours Worked Decline

11 March 2021

By David Barwick – FRANKFURT (Econostream) – German hourly labour costs climbed a seasonally and calendar-adjusted 2.1% on the quarter in the last quarter of 2020, the German Federal Statistical Office said Thursday.

Owing to measures to contain the pandemic, the number of hours worked declined versus 3Q, which mathematically led to a strong quarterly increase in costs, the Statistical Office said.

Compared to 4Q 2019, the last quarter unaffected by the pandemic, labour costs were a calendar-adjusted 3.5% higher.

Labour costs are an important component of overall price pressures and thus of high interest to the European Central Bank. ECB President Christine Lagarde has cited weak wage pressures as one of the factors due to which ‘underlying price pressures are expected to remain subdued’.

ECB Governing Council member and Bundesbank President Jens Weidmann suggested last week that the recent surge in inflation was unlikely to be long-lived owing to low wage pressures.

‘For a more sustained push in inflation we would need to see corresponding movements in wages, and that’s not something that we observe at this juncture,’ he said. ‘We don’t expect an underlying push in the inflation rate, but rather a gradual rise over time towards our target.’