Yet current incomes also matter, even beyond what they might signal for future incomes. That is particularly true when households face credit constraints, as we would expect in a credit crisis. Current labor income captures the role of the labor market along its two dimensions, employment and wages.
“At the area-wide level, both (real) labor incomes and consumer spending have stagnated since the peak. In addition, there is a marked divergence in experience in both labor incomes and consumer spending.” the team adds. In terms of real labor incomes, the range of experience spans falls in real labor incomes of almost 15% in Greece (and 10% in Ireland and Spain) to rises of 5% or more in Germany, Austria and Luxembourg.