Exclusive: Indeed Wage Tracker Expert: Wage Slowdown Now Seen in Most Job Categories

22 February 2024

By Isabel Teles – FRANKFURT (Econostream) – Two sources of wage data released this week sent mixed signals, but an expert responsible for an indicator of high importance to European Central Bank monetary policy has assured Econostream that on balance, the deceleration of wages was broad-based and set to continue.

On Tuesday, the ECB published data based on negotiated wages showing that euro area wage growth in 4Q was down to 4.46% y/y after 4.69% in 3Q. That was the first decline since Q2 2022.

Just a few hours earlier, however, the Indeed Wage Tracker, based on wages offered in job ads online, was updated to show that wage growth in the area picked up to 4.05% y/y in January from 3.95% the previous month, boosting the three-month moving average as well.

The development with respect to the tracker was no indication of a trend reversal, according to Pawel Adrjan, director and economic researcher at Indeed and one of the economists responsible for the indicator. The uptick in January was mainly driven by an increase in Italy and in the Netherlands, he said, whereas France and Germany posted declines and other countries remained flat.

Italian data are ‘quite volatile’, he noted, making a single month a potential source of misleading signals that should not obscure the underlying trend. More importantly, he observed, ‘long-run average wage growth is quite low, so the recent rise shouldn't be concerning to the ECB from the standpoint of the wage growth rate.’

In any case, he argued, wage growth would continue to weaken during this year.

‘First, because the labour market is gradually weakening, and we see that in falling job posting levels on Indeed in countries like France and Germany’, he reasoned. ‘Second, because inflation has also fallen, and that is likely to reduce wage demands from workers and unions.’

For greater certainty, for every month in the series, Indeed calculated wage growth in each of the 54 occupational categories covered by the tracker compared to the same category half a year previously, he said.

The results supported the idea that a broad-based deceleration of wage growth was currently underway, he said.

‘In the euro area, wage growth was slower in January than six months prior in 56% of the occupations included’, Adrjan said. ‘In other words, the slowdown is apparent in most occupational categories, suggesting it is not a niche phenomenon, and there is a broad decline.’

The ECB has been using Indeed data since November 2022, with the tracker referenced many times in the communication of Executive Board members since then.

During the press conference following the January Governing Council meeting, for example, ECB President Christine Lagarde called the tracker an important indicator of labour market tightness, and on February 8, Chief Economist Philip Lane said that the Indeed tracker provided ‘an important perspective’ on wage bargaining.

Given the importance of wage growth for the evolution of monetary policy, if the Indeed Wage Tracker pointed to less inflationary pressure from this source, the ECB would have a significant additional argument to stop being leery of policy easing.