Highlights

• Sectoral shifts, such as shrinkage of low labour productivity and the low-wage construction sector, can lead to apparent increased aggregate average labour pro-ductivity and average wages, especially when capital intensity differs across sectors. • For 11 main sectors and 13 manufacturing sub-sectors, we quantify the compositional effects on productivity, wages and unit labour costs (ULCs) based and real effective exchange rates (REER), for 24 EU countries. • Compositional effects are greatest in Ireland, where the pharmaceutical sector drives the growth of output and productivity, but other sectors have suffered greatly and have not yet recovered. • Our new ULC-REER measurements, which are free from compositional effects, correlate well with export performance. • Among the countries facing the most severe external adjustment challenges