Average Salary in Israel Rises — the Alarming Truth Behind the Numbers

Meitav's chief economist Alex Zabzinski explained that the rise in Israel's average salary reflects a change in the composition of the employed, not a real acceleration in incomes. Most new jobs are created in the public sector. Business activity is recovering, and companies expect inflation to decline. The value of the population's asset portfolio rose by 19% over the year. The US labor market is weak, and AI boosts productivity without employment growth. The Fed is unlikely to raise rates.

Meitav's chief economist Alex Zabzinski, in his weekly review, analyzed the labor and bond markets in Israel, the state of the US labor market, the impact of AI, and the prospects for Fed rates. In his assessment, Israel's risk premium has decreased, as has that of the Gulf states. The rise in the average salary mainly reflects a change in the composition of the employed, not a real acceleration in incomes: most new jobs are created in the public sector. Business activity is recovering, and companies expect inflation to decline. Spending will be supported by the 'wealth effect': the value of the population's asset portfolio has grown by about 19% over the year, exceeding the annual wage bill in the economy. Institutional investors were selling currency, while the business sector was buying. The corporate bond market prices in too low a risk, especially in real estate. The US labor market is weak, and employers have bargaining power. AI is changing profit formation: companies grow without increasing headcount, which boosts productivity and should slow inflation. The Fed is unlikely to raise rates, and the US Treasury is conducting 'quiet QE'.