Unsurprisingly, the annual change of US nominal wages (measured by the employment cost index) surpassed 4 per cent as early as in the third quarter of 2021, approached 6 per cent in 2022, and today still stands above 5 per cent, a level that is difficult to reconcile with an inflation target of 2 per cent (fig. 4).
In the euro area, on the other hand, in spite of current requests for sizeable wage increases in some countries, wage growth has so far remained moderate, around 3 per cent, and there are no clear signs of a wage-price spiral as a whole. Fourth, the energy shock had a very different role on both sides of the Atlantic.