Central Bank and Indeed research indicates wage growth increased sharply in early 2022

The Central Bank of Ireland has today (9 November 2022) published an Economic Letter  “Wage Growth in Europe: Evidence From Job Ads” (PDF 841.17KB).  The Letter is a research collaboration between the Central Bank and Indeed and is authored by Central Bank economist Reamonn Lydon and Indeed economist Pawel Adrjan. It draws on data from millions of job postings on Indeed to present a new monthly wage growth tracker, examining trends in posted wages across France, Germany, Ireland, Italy, the Netherlands, Spain and the UK. 

Developments in posted wages in job ads can provide a timely and forward-looking indicator of wage growth trends.  As posted wages tend to be more sensitive to the economic cycle, they can shed light on the tightness of the labour market. The wages of new hires are also an indication of the expectations of employers in terms of future demand.

Against this background, the Letter finds that posted wage growth accelerated sharply in the first half of 2022 before easing slightly in the third quarter. In the six euro area countries analysed, wage growth reached 5.2% year-on-year in October — more than three times the pre-pandemic rate — while growth in the UK was 6.2% — double the pre-pandemic rate — and appears to have peaked at this level.  For individual euro area countries, October wage growth was highest in Germany (7.1%), followed by France (5.0%), Ireland (4.7%), Italy (4.2%), Netherlands (4.0%) and Spain (3.5%).

Early signs are that wage growth in job ads has plateaued at these historically high levels — and actually fallen in some countries.  Combined with gradually declining job postings in certain countries, this suggests that some employers are starting to rethink their demand for labour as they balance the currently tight labour market against an increasingly uncertain and deteriorating economic outlook.

The Letter also looks at whether wage growth in 2022 is a broad-based phenomenon or if it is limited to a smaller share of sectors where supply and demand imbalances may be a factor.  At the low point of the pandemic in 2021, around 30-40% of occupations in euro and the UK were seeing posted wage growth of at least 3%. As of October 2022, these shares had increased to over 60-80%.  The pre-pandemic share was 40%.

Occupations seeing the fastest wage growth across all countries include community and social services; cleaning and sanitation; food preparation and services; driving; customer service; loading and stocking; retail; childcare; sales; and, installation and maintenance.  

Indeed expects to publish updated data on wage growth on a monthly basis.

“Wage growth in Europe: evidence from job ads” uses data on wages advertised in Indeed job postings from 1 January 2018 to 31 October in France, Germany, Ireland, Italy, the Netherlands, Spain (together, these countries account for over 80% of total euro-area employment) and the UK. In total, the sample comprises around 24 million job postings. The data was also compared against trends in the level of posted wages from quarterly data on compensation per employee in the Quarterly National Accounts. Indeed data can be extracted and analysed around a week after the end of each month, comparing favourably with considerably longer lags of around 90 days for official statistics on wages.