Labour market – good start of Q2

Wages surprised to the upside

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons rose to 7.8% YoY in April from 6.7% in March, running markedly above our forecast equal to the market consensus (7.1%). Thus, nominal wage dynamics hit the highest level since January 2012. Real, adjusted for the changes in prices, corporate wages rose by 6.1% YoY in April (the highest since June 2016) vs. 5.3% in March.

The main factor behind higher annual wage dynamics was the low base effect related to the abatement of the impact of bonuses paid in mining (see MACROpulse of 18/5/2017). In addition, in April 2018, annual bonuses were paid in Biedronka supermarket chain, which has also contributed to higher wage growth. Wage dynamics were was also supported by statistical factors related to a favourable difference in the number of working days, boosting the wage growth of employees doing piecework. We expect that in subsequent months the annual wage growth rate will stand between 7% and 8%, supported by the growing wage pressure in several industries. In the Monday's MACROmap we will present an in-depth analysis of wage growth in the coming quarters.

Stabilization of employment growth

According to GUS data, corporate sector employment rose by 7.0k MoM in April vs. an 8.3k increase in March. Consequently, the annual employment growth has not changed in April compared to March and amounted to 3.7% YoY. In our view, the employment growth was boosted by gradual acceleration in real wage growth, which supports the return to the labour market of so-far professionally inactive persons, and by growing registered employment of immigrants from Ukraine. Our view is supported by the results of business survey for manufacturing (PMI). From the beginning of 2018 the sub-index concerning employment has stood visibly above the values recorded in H2 2017, which signals sustained strong demand for labour in manufacturing.

In subsequent quarters we expect a gradual slowdown of the improvement in the labour market and a moderate decline of the annual employment growth rate, both in the corporate sector and in the national economy. Employment growth will slow down despite the expected by us increase in public and private investments whose potentially positive impact on employment will be limited by the growing difficulties of companies in finding skilled labour.

Private consumption: good start of Q2

We estimate that the real wage growth (employment times average wages) in the corporate sector rate rose to 10.0% in April vs. 9.3% in March and in the whole Q1. The acceleration in real wage fund growth poses an upside risk to our forecast of private consumption growth in Q2 2018 (4.4% YoY vs. 5.4% in Q1).

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