Report
Why inflation will remain high in the euro zone: The labour market will remain tight
The low productivity gains in the euro zone can be explained by the fact that the new jobs created are filled by more and more unskilled workers as the unemployment rate falls. The lack of productivity gains means that even with sluggish growth, employment continues to rise and the labour market remains tight. This persistent labour market tightness means that wages are rising sharply and persistently, and the lack of productivity gains is leading to a very sharp rise in unit labour costs. The result is a vicious circle: no productivity gains, ongoing job creation, persistent labour market tightness, sharply rising unit labour costs and, as a result, persistently high inflation (excluding energy and food) , as i nflation can only fall as a result of falling import prices or profit margins, which cannot be permanent.
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Natixis
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