(on a YoY basis).
Total employee compensation in the Euro area was 2.8% higher in Q4 2015 than in Q4 2014, in nominal terms. This pace of increase has been increasing regularly since the end of 2012, and is now in line with that of nominal GDP. Profits and other income, conversely, have slightly decelerated in the latest quarters (+3.0% in Q4 vs 3.5% in Q3). Within total employee compensation, total wages and salaries were up 3.2% while employer’s social contributions increased only 1.4%.
The rise in total employee compensation can be partly explained by the recovery in total employment (up 1.2%, its highest since the Great Recession) while the rest is due to more hours worked per employee and a modest rise in hourly compensation (nominal hourly labour costs are up 1.3%).
Regarding the Eurozone’s four largest economies, the pace of nominal growth of total employee compensation was higher in Germany and Spain (roughly 4%, with a similar pace for profits and mixed income) and lower in Italy (roughly 2% for both). In France, total employee compensation rose at a very subdued pace (only 1.6%) while profits & mixed income were accelerating (+5,5%) although from low levels.
Due to the continuing (but very gradual and uneven across countries) improvement in the labour market, we expect total employee compensation to continue to rise at a similar pace in 2016. This will provide a significant support to consumption, well needed as a buffer against the negative spillovers from the many financial, political and external risks that the European recovery is facing.