4 ] the ecb wage tracker – an important tool used to assess wage developments across the euro area – is signalling that overall wage pressures have moderated since 2023. [ 5 ] furthermore, the indeed wage tracker – which reflects the wages offered in job postings and thereby should be a leading indicator for overall wage dynamics – has materially decelerated in recent months. at the same time, wage growth is expected to remain elevated in 2024, and to show a bumpy profile. these developments reflect the staggered nature of the wage adjustment process as workers continue to recoup real wage losses from past price shocks, as well as the important role of one - off payments in this process. such one - off payments are also behind the increase in euro area negotiated wage growth in the first quarter. similarly, one - off payments likely played a significant role in the increase in the growth rate of the “ wages and salaries ” component in the experimental flash release for eurostat ’ s labour cost index ( lci ) for q1 2024, which jumped to 5. 0 per cent from 3. 2 per cent in q4 2023. the impact of higher wages on price pressures depends on the rate of labour productivity growth. in 2023, labour productivity fell, such that unit labour costs grew more quickly than wages. preliminary data for the first quarter of 2024 suggest that aggregate labour productivity was constant ; given the strongly procyclical behaviour of labour productivity, the march staff projections foresee labour productivity growing at 0. 1 per cent in 2024, 1. 2 per cent in 2025 and 1. 2 per cent in 2026 due to the output recovery outpacing employment growth. [ 7 ] under this baseline, unit labour costs will grow more slowly than nominal wages. in addition to a slower rate of growth of labour costs, deceleration in domestic inflation also requires compression in profits. the annual growth in unit profits peaked at 9. 4 per cent in the last quarter of 2022 and stood at 2. 5 per cent in the fourth quarter of 2023. the march projections exercise foresees unit profit growth turning negative in 2024, implying that profits will buffer the relatively strong labour cost growth. unit profit growth is then expected to recover somewhat from 2025, helped by a robust economic recovery and strengthening productivity growth. chart 6 labour cost indicators ( annual percentage changes ) sources : eurostat and ecb calculations. notes : compensation per employee and per hour are

/ 681. aspx taylor, j ( 2013 ) “ forward guidance as an incipient policy rule at the boe and ecb ”, http : / / economicsone. com / 2013 / 08 / 25 / forward - guidance - as - an - incipient - policy - rule - at - theboe - and - ecb / tucker, p ( 2013 ) “ monetary strategy and prospects ”, speech at the association for financial markets in europe flagship conference on financing growth, london. http : / / www. bankofengland. co. uk / publications / pages / speeches / 2013 / 679. aspx bis central bankers ’ speeches annex : charts chart 1 : uk cpi inflation chart 2 : recoveries across the g7 per cent index ( pre - crisis preak = 100 ) germany france italy uk us japan 2005 2006 2007 2008 2009 2010 2011 2012 2013 sources : eurostat and datastream the pre - crisis peak was : 2008 q1 for germany, france, japan and the uk ; 2007 q3 for italy ; 2007 q4 in the us ; and 2008 q3 for canada. chart 3 : uk labour productivity percentage change on five years earlier - 5 - 10 - 15 - 20 bis central bankers ’ speeches