Wage growth eases despite a tight labor market

ISRAEL - In Brief 05 Mar 2026 by Sani Ziv

---

Today the Central Bureau of Statistics published wage data for January. When we analyze the figures, we see a clear slowdown in the pace of wage growth in the final quarter of 2025. Trend data show that nominal wages increased by 2.2% in current prices between October and December 2025, compared with an annualized increase of 4.6% in July-September 2025.We also like to look at the data on an annual average basis. The figures for 2025 as a whole clearly point to a slowdown in the pace of wage growth. Average nominal wages increased by 3.7% in 2025 (2025 average versus 2024 average), down from 4.6% in 2024 and 6.2% in 2023. In real terms, wage growth slowed even more sharply, rising by only 0.7% in 2025, compared with 1.5% in 2024 and around 2% in 2023. A key factor behind the slowdown is the wage freeze in the public sector. At the same time, wage growth in the business sector has also moderated, pointing to a broader easing in wage pressures. The decline in inflation has also contributed to the moderation in nominal wage growth. From a monetary policy perspective, this trend provides the Bank of Israel with greater room to consider interest rate cuts later this year. The chart below shows the annual growth rates of nominal and real wages in Israel between 2021 and 2025. In 2025, nominal wage growth moderated to around 3.5%, following the stronger increases recorded in 2023-2024. Real wage growth remained modest, at close to zero, reflecting the limited improvement in purchasing power compared with previous years. Overall, the data suggest gradual normalization in wage growth after the sharp fluctuations observed earlier in the period.Nominal and real wage growth in Isr...