In addition to their regular forecasts for the major economic variables, twice a year (in February and August) we ask our Consensus Forecasts panellists’ for their projections for total employment growth and wage or employment costs for the next twelve years, along with forecasts for real and nominal GDP growth over the same period. Using indices derived from these projections, we have calculated forecasts for changes to broad measures of productivity growth (real and nominal GDP per employee) and an indicator of unit wage costs (calculated by dividing the employment cost indices by the indices of real GDP per employee). Although some of the wage definitions used are imperfect measures for total compensation per employee, our calculated indices do provide an indication of future trends in unit wage costs.

Our surveys for Trends in Productivity and Wages cover each of the countries listed below. For illustrative purposes we have included forecast tables for the United States and Japan, along with a text commentary taken from our February 2022 survey below. To view a sample issue of Consensus Forecasts please click the “Download Sample Issues” button below.

 

 

 

 

 

Our Trends in Productivity & Wages survey [measured as Real Output (GDP) per Employee] is not broadly comparable across countries, because of differing wage definitions, and because governments took different approaches to mitigating the economic shock of 2020 and 2021. This ranged from paid furlough and company subsidies in order to limit job layoffs in Europe, to hikes in unemployment insurance in the US. Real Output Per Employee estimates for the US recorded a +3.0% advance in 2020, due largely to the -6.2% collapse in total employment. This outpaced the -3.4% decline recorded in overall GDP. By contrast, Real Output Per Employee in 2020 in Japan, Germany, France, the UK, Italy and the Euro zone saw significant contractions, and the decline in employment was far smaller than that of GDP. Productivity rebounded strongly in 2021. Going into 2022 and beyond, the pace of Real Output Per Employee for the vast majority of economies is expected to slow noticeably to pre-crisis growth rates ranging between 0.3-1.5%. This underscores longstanding productivity weakness, perhaps due to aging demographics and slowing economies. Only Germany is expected to see slightly stronger productivity. The rapid turnaround in remote working highlighted labour markets’ resilience and flexibility, and many observers believe that this will be a future pattern – although there is still debate about whether this will lift productivity over the medium-term (the pandemic also reinforced preferences of humans to meet, learn and socialise in person). And not all people-facing services can offshore work remotely. Still, this and automation represent a structural transition. The spotlight on inflation has drawn attention to our panel’s Unit Wage Cost forecasts which are expected to rise significantly in the US.

A portion of text from Consensus Forecasts – G7 and Western Europe, February 7, 2022.