Euro zone labour costs grew in the third quarter on the back of higher wages in industry, although the overall expansion slowed from the previous three months, according to new Eurostat data.
Total hourly labour costs in the euro zone rose 3.2 per cent year-on-year in the quarter after an upwardly revised 4.3 per cent gain in the previous three months, the European Union's statistics office said.
Of the hourly labour costs, wages grew by 3.1 per cent, a slowdown from 4.2 per cent in the previous quarter.
Other costs, which include employers' social contributions plus employment taxes, rose 3.6 per cent year-on-year, down from growth of 4.6 per cent in the second quarter.
The continued rise in labour costs at a time when unemployment is rising quickly is a result of wage deals struck in 2008, before the global credit crunch became a full-blown crisis with the fall of Lehman Brothers in September that year.
Economists have said higher wages are likely to help household demand and support a fragile economic recovery.
The highest increases in hourly labour costs arose in Finland and Germany -- 6.2 per cent and 4.8 per cent respectively, followed by Spain and Portugal with 4.7 per cent each.
In the entire 27-country European Union, labour costs fell only in the three Baltic states -- Estonia, Latvia and Lithuania. They are not part of the euro zone.
Labour costs in industry rose 5.4 per cent in the third quarter, down from 6.1 percent in the second. Wages rose 5.2 per cent and other costs 5.9 per cent.
Labour costs in construction rose 2.9 per cent, of which wages went up 2.9 per cent as well.
The biggest slowdown in labour cost growth came in the services sector, which produces more than two thirds of the single currency area's gross domestic product. The sector's labour costs rose only 2 per cent against 3.5 per cent in the previous three months, and wages grew by 1.9 per cent.
Reuters