Pro-cyclical improvement in Euro area's labour productivity pushes ULC lower

Unit labour cost (ULC is a measure of total compensation adjusted for labour productivity growth) increased by 0.8% yoy in Q2 15, marking its slowest rise since Q2 11. ULC is moderating on the back of higher growth in labour productivity while compensation per employee is actually picking up gradually. 

Both productivity and compensation per employee have grown at their fastest pace since Q1 14, but the pace of acceleration in productivity has offset the slight acceleration in compensation per employee. 

In Q2 15, labour productivity grew at 0.7% yoy and is currently above its long-term average (since 2001) of 0.5%. Meanwhile, compensation per employee grew at 1.5% yoy but is still well below the long-term (since 2001) average of 2.2%, notes Societe Generale.