Israel's wage growth slows to 2% in January, easing inflation concerns

ISRAEL - In Brief 04 Mar 2025 by Sani Ziv

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In January 2025, wage growth in Israel slowed to a year-over-year increase of 2.0%, following an increase of 4.5% in December and a modest 0.9% increase in November. This marks a decline compared to the average 5.5% increase in April-October 2024 (see the chart below). We attributed the slowdown in November and December to a high base effect from late 2023, when wages surged due to technical factors, including a temporary wave of unpaid leave (HALAT) during the early stages of the war. However, as this base effect subsided in January, the minor wage increase may signal a deceleration in wage pressures. When we examine real wages—which declined by 1.8% year-over-year—they further underscore the persistent challenges to households’ purchasing power. This deceleration could potentially contribute to a moderate easing of price pressures. Real vs. nominal wage growth (YoY % Change)Source: Central Bureau of StatisticsHigh-tech wage growth slows to 4.4% average, indicating a deceleration trend When assessing whether wage growth is decelerating, it is important to focus on the high-tech sector, as the main driver of economic growth in recent years. Although December’s data (the bonus month) recorded an impressive 7.8% increase, the three-month average revealed year-over-year growth of 4.4% (compared to an inflation rate of 3%), and when compared to the approximate 7% growth observed in 2022 and 2023, a clear slowdown is evident. Additionally, employee job numbers in high tech have remained consistent with the previous year's levels.