The effects of the Phillips curve in the United States and the euro zone

Nominal wage growth has slowed in the United States since the start of 2022 and slowed (slightly) in the euro zone only since the second quarter of 2023. In addition, productivity gains are rising in the United States and falling in the euro zone, which should lead to faster wage growth in the United States than in the euro zone. Lastly, the unemployment rate is very low, compared with historical levels, in both the United States and the euro zone. This raises the question of Phillips curve effects in the United States and the euro zone. Has the relationship between wages, unemployment, productivity and inflation changed recently? Is there a structural difference in wage formation between the United States and the euro zone that explains the gap in wage growth between the two countries/regions today? We find that: Core inflation explains wage increases better than headline inflation; There is no significant difference between wage formation in the United States and the euro zone; If we include the recent period (2020-2023) in the estimation period, the estimated degree of indexation of wages to prices increases in the United States, and the effect of productivity gains on wage growth increases in the euro zone. The fact that wages have slowed more in the United States than in the euro zone since the start of 2022 cannot therefore be explained only by the increase in indexation of wages to prices in the United States, while core inflation has been slowing since the second quarter of 2022.