23/8/2014: Labour Costs and Euro area's myth of 'productivity' gains
Looking back at July 2014 IMF Article 4 paper on Euro area (most of which I covered back when it was published), here is an interesting chart mapping changes in the euro area countries' unit labour costs. The chart is complex, so let me point out few things in it: Firstly: improvements in the unit labour costs (ULCs) is reflected in the vertical distance between the black dot (accumulated change in ULCs over 2000-2007 period: higher level of the dot reflects lower competitiveness or higher ULCs compared to EA17 levels) and the black bar (accumulated change in ULCs over 2008-Q3 2013 period). This shows that Ireland has delivered (a) the highest ULCs deterioration of the sample of countries reported over 2000-2007 period, and (b) since 2008, Ireland has delivered the largest improvement in competitiveness (ULCs drop) of the sample. Second largest improvement in ULCs was recorded in Greece and it is comparable to, but modestly shallower than in Ireland; third and virtually indistingu...