From Rabobank Research, March 24:
Summary
Europe has been facing waning productivity growth for a while, but has recently also been
confronted with rising energy and labor costs. Additionally, geopolitical turmoil and a global
trade war have further intensified the struggle for European competitiveness. In this report we compare the competitiveness of the euro area economy with that of the
United States, focusing on unit labor costs – analyzing both levels and trends. We find that in 2023, export-weighted unit labor costs in the US were almost 30% lower than those in the euro area, indicating that the US has a highly competitive export sector.
The US has a unit labor cost advantage in sectors such as information and communications
technology (ICT), computers and electronics, the petroleum industry, and specialized business
services, which is also visible in its export specialization. In ICT and specialized business
services, moreover, the euro area’s unit labor cost gap with the US has been widening. In contrast, the euro area has been gaining ground in the machinery and electrical equipment industry. The euro area also has a relatively strong starting position in wood, paper and printing; rubber, plastic, and building materials; and transportation and storage, and has been expanding these strengths.
Although the euro area has traditionally been more specialized than the US in the production of basic materials such as chemicals and steel, these sectors have recently come under significant pressure due to rising energy costs.
In industries where European competitiveness has improved compared to the US, gains in
productivity and changes in labor costs have almost always worked in tandem. Conversely, in
industries where the euro area has become less competitive, we see a pattern where labor
costs rose at a slower pace compared to the US, but the larger gap in productivity growth has
more than offset this wage moderation, leading to an erosion of competitiveness....
....MUCH MORE (16 page PDF)
HT: a very interesting piece by Rabobank at ZeroHedge: How The Signal Leak Kickstarted The "Mar-A-Lago Accord"
