Europe’s Furlough Programs Give Labor Costs an Artificial Boost

Labor costs in the euro area surged in the second quarter, skewed by coronavirus lockdowns that shut huge parts of the economy and reduced workers’ hours.

The loss of hours wasn’t matched by a decrease in wages, as businesses kept people on payrolls thanks to subsidies from government furlough programs. According to Eurostat, that pushed hourly wage costs up 5.2% year-on-year, double the average rate in 2019. Total labor costs were up 4.2%.