In view of these developments, the December 2022 Eurosystem staff projections were based on an assessment that compensation per employee growth will increase from 4.5 per cent in 2022 to 5.2 per cent in 2023, 4.5 per cent in 2024 and 3.9 per cent in 2025 and unit labour costs by 3.2, 5.0, 3.1 and 2.6 per cent, respectively.
[24] The higher-than-normal nominal wage increases largely reflect the catch up process following the drop in real wages that has occurred since the middle of 2021. These rates of high wage growth are expected to lead to a rotation toward wage growth as a main driver of underlying inflation in the euro area (Chart 13).