Euro zone: Productivity gains are weak; is this good or bad news?

In the euro zone as a whole, and in France, Germany, Spain and Italy, which we analyse in particular, productivity gains have become very weak , even zero in the recent period. The advantage of this situation in the short term is obviously that job creation is strong and that the unemployment rate continues to decrease; and that this job creation mainly concerns low-skilled employees, which contributes to a weakening of productivity, but reduces the low-skilled unemployment rate, which is the highest by far. The drawback of this situation is the acceleration in unit labour costs, which is particularly marked in Germany and Italy, which cannot be passed on to prices because of the lack of corporate pricing power, and which therefore worsens euro-zone companies’ profitability (but not their international competitiveness against the rest of the world , thanks to the depreciation of the euro).