Employment Roly-Poly

Acceleration of wage growth in October

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons rose to 7.6% YoY in October from 6.7% in September, running above our forecast (6.5%) and the market consensus (6.7%). Real, adjusted for the changes in prices, corporate wages rose by 5.7% YoY in October vs. 4.7 in September.

The visible acceleration in wage growth in October is surprising in the light of last year's high base effect and the decrease recorded in September 2018 in the 6-month rolling average for the annual growth rate of corporate wages, which can be interpreted as a signal of lower wage pressure. This suggests that the main factor behind higher corporate wage dynamics in October was the shift of payment of variable remuneration in some sectors. The publication of detailed data on wage structure in the Statistical Bulletin will enable us to verify this thesis.

We expect that the annual wage growth supported by moderate wage pressure in several industries will stand around 7% in subsequent months. The factors which limit wage growth in enterprises will be the launch of the Employee Equity Scheme (meaning higher non-wage labour costs) and the uncertainty about the fate of the act lifting the limit on the annual basis of assessment of pension contributions, found to be unconstitutional by the Constitutional Court last week. The room for wage increases will also be limited by higher operating costs of enterprises due to the rising electricity prices (see MACROmap of 8/10/2018). Our scenario is supported by the decrease in wage pressure in enterprises signaled by the October NBP business survey (Quick Monitoring)

Higher employment after two months of declines

According to GUS data, corporate sector employment rose by 2.4k MoM in October vs. a 4.2k decrease in September. Thus the October data indicate that after two months of monthly decline, employment has recorded positive dynamics. In turn, the annual employment growth has not changed and amounted to 3.2% YoY. Like in previous months, employment growth in October was limited by the increasingly heavy barrier in the form of shortage of skilled labour and the restructuring processes in certain industries (conducive to lower number of jobs). We expect that due to the above-mentioned factors the annual dynamics of corporate employment will gradually decrease in subsequent months. This is in line with our scenario assuming a gradual decline in non-agricultural employment growth rate in the coming quarters (see MACROmap of 10/9/20180.

Upside risk to consumption growth in Q4

We estimate that the real wage fund growth rate (employment times average wages) in enterprises rose to 9.0% YoY in October vs. 8.1% in September and 8.4% in Q3. This poses a slight upside risk to our forecast of private consumption growth in Q4 2018 (4.7% YoY vs. 4.8% in Q3).

Today's data on corporate wages and employment are neutral for PLN and bond yields, we believe.