One of the great economic puzzles of 2026 has been this: If the labor market is so strong, why has wage growth been so weak? New data points to health care as a major culprit.

The big picture: Employers' overall spending on worker compensation has continued rising at the same steady clip as last year — but more of that spending is going to employee health benefits, leaving less for wages and salaries.

• Factor in elevated inflation, and private-sector employers' costs for wages and benefits have fallen 0.6% in real terms in the last year, compared with a gain of 0.6% in the 12 months through September 2025.
• That helps explain Americans' deep dissatisfaction with economic conditions despite low layoffs and unemployment.

State of play: The Employment Cost Index, released quarterly, is the gold standard data set for understanding what employers pay their workers — not just cash outlays like salary and hourly wages, but employer-provided health, retirement and other benefits.

• It presents a fuller picture of pay trends than, say, the average hourly earnings data released alongside the monthly jobs report — which has pointed to a sharp deceleration in wage growth this year.
• The ECI shows the sharpest rise in employers' health insurance costs in 20 years — and a corresponding pullback in cash raises.

By the numbers: Overall compensation costs for the private sector are up 3.4% over the 12 months ended in September, little changed from the 3.5% rise in the comparable period ending September 2025.

• But wage and salary compensation was up only 3.1% this year, compared with 3.6% a year ago. Health benefit costs rose 6.4%, compared with 6.1% in the comparable period ending in September 2025.

What they're saying: "The sharp deceleration in wage growth we see in the monthly jobs report looks to be mostly a mirage," Guy Berger, senior adviser on labor markets at Access/Macro, tells Axios.

Between the lines: Employers are staring at massive increases in health insurance costs, as our colleagues have reported, reflecting more demand for health services, more chronic disease and the cost of GLP-1 weight-loss drugs.

• They have only so many options for how to deal with these costs. They can cut back on benefits. They can look for cost savings. They can increase employee out-of-pocket contributions.
• Or, they can absorb the costs either through lower profitability or by keeping a lid on other forms of compensation like employee pay raises.
• The ECI data points to the latter.

The intrigue: Berger calculates that if health care costs were growing at more like a 3% annual rate, as they were not long ago, wage growth would be 0.2 to 0.3 points faster.

• He wrote on Substack that "the surge in these employer contributions probably understates the squeeze on workers."
• "Employer contributions might not be fully keeping up with rising health insurance costs," Berger noted, and "it's also possible that health insurance plans are becoming stingier, which means more costs out of pocket."

The bottom line: American workers may not pay health insurance premiums directly, but rapidly rising prices are a factor in pinching paychecks.

France's economy unexpectedly contracted in the third quarter, extending a year of stagnation amid political turmoil.

By the numbers: Europe's second-largest economy shrank 0.1% last quarter, after stagnating in the second quarter and contracting 0.2% in the first.

• The broader eurozone grew 0.4%, twice the rate economists expected.

• French inflation accelerated to 3.8% in October from 3.4% in September on an annual basis, driven by rising prices for energy and services.

Zoom in: France's 10-year government bond yield jumped as much as 0.1%, to about 4.98%, after the economic data before falling back.

• It remains below last week's peak of 5.14%, which was the highest in 24 years.

Between the lines: France risks a vicious cycle. Efforts to narrow its deficit could fuel further unrest, discouraging spending and investment.

• That would weaken growth and tax revenues, potentially forcing more unpopular cuts or tax increases.

The big picture: Protests that began over school staffing and conditions late in the third quarter likely had little impact on GDP. Household spending continued growing.

• Since then, demonstrations have spread nationwide over living costs and public services — with riots, looting and clashes with police.

The intrigue: European Central Bank president Christine Lagarde's early departure is fueling speculation about how involved she might become in the French presidential election at a critical juncture for her home country.

• "I want to have the freedom of speech, the freedom of expression, and the freedom to engage on matters that are not monetary policy matters," Lagarde wrote on X. (She has previously ruled out running for president.)
• Former central bankers Mario Draghi and Mark Carney both entered politics in their home countries (Italy and Canada, respectively) during periods of crisis.