NORWAY: Pay Pressures Are Decelerating, But Possibly Not Fast Enough

Whole economy pay metrics eased in Q3, but 4Q/4Q measures of wages and salaries and compensation of employees remain above Norges Bank’s 4.7% September MPR projection. Firm wage growth has contributed to sticky inflationary pressures, and Norges Bank are sensitive to upside surprises. The annual earnings growth series will be available alongside the Q4 national accounts in February, which will allow the cleanest comparison with Norges Bank projections – other metrics we track aren’t perfect substitutes for this data.

• 4Q/4Q wages and salaries growth fell to 5.6% in Q33 from 5.8% prior, the fifth consecutive quarter of easing. Meanwhile, 4Q/4Q compensation of employees pulled back to 5.1% (vs 5.5% prior). There were greater decelerations in the more volatile Y/Y measures of wages and salaries per employee (4.4% vs 5.5% prior) and compensation per employee (3.8% vs 5.0% prior).
• Total employment rose 0.1% Q/Q, below Norges Bank’s 0.2% projection. This implies 1.0% Q/Q productivity growth in Q3 (since headline GDP rose 1.1% Q/Q).
• However, we prefer to look at productivity on a mainland GDP basis.  With employment growth at 0.1%, this implied zero mainland productivity growth in Q3 (after 0.4% in Q1 and 0.3% in Q2).
• A reminder that Norges Bank’s productivity assumptions have been a little peculiar in recent MPRs. Solid H1 ’25 productivity metrics contributed to an upward revision of Norges Bank’s potential output estimates, but at the same time the bank expects recent increases in productivity to be temporary (i.e. the output gap is expected to become negative again in 2026).