In yesterday’s Times, Steven Rattner grudgingly admits that expansionary monetary policy in Europe may be a good thing, but bemoans the lack of adjustment, and gives us this chart:

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So France, like Italy though not quite to the same extent, has a problem of unsustainable growth in labor costs. Right?

No, no, no.

The way Rattner presents this, you’d think that falling unit labor costs are always a good thing. But that’s not at all true. In general, we want a small amount of inflation in modern economies, both to ease adjustment and to help avoid the zero lower bound; the Fed’s target is 2 percent, the ECB’s target is “close to but below” 2, and there’s a strong case that both targets should be higher. And if overall prices are rising 2 or 3 percent a year, unit labor costs should be rising at roughly the same rate. We certainly don’t want falling labor costs as the norm.

So how do major European economies stack up against what should be happening? Like this:

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So, has the euro area as a whole had excessive labor cost growth? No — inflation has if anything been too low. Has France had excessive labor cost growth? No — it has grown only at the overall euro rate.

Yes, Italian costs have risen too much, mainly because of terrible productivity performance. But the other country that’s way out of line isn’t France — it’s Germany, whose costs have risen much too little.

French labor costs are not a problem; German labor costs are. And it’s depressing, in at least two senses, that so many people don’t get that.