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Real wage growth increasingly close to pre-pandemic level

Real wage growth increasingly close to pre-pandemic level

According to GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 people rose to 4.9% YoY in November vs. 4.7% in October, running above the market expectations (4.7%) and in line with our forecast (4.9%). In real terms, corporate wages, adjusted for the changes in prices, increased by 1.8% YoY in November and 3-monthly average wage dynamics amounted to 1.9% in November. It is worth noting that this average has been growing since July 2020 and in November stood slightly below the level recorded in February (2.8%), namely the month in which the pandemic had not yet such a strong negative impact on the labour market. The increase in the wage dynamics between October and November resulted from last year’s low base effect and from the statistical effect in the form of a favourable difference in the number of working days (in October 2020 the number of working days was lower by one from 2019 while in November 2020 it was by one day higher than the year before) which was conducive to higher wage dynamics of employees engaged in piecework. The data on wage dynamics in the corporate sector in November confirm that the freeze of employment in enterprises and the resulting slight increase in unemployment after the outbreak of the pandemic have significantly reduced the negative impact of COVID-19 pandemic on wages. We expect that the restrictions imposed due to the second wave of the pandemic will limit the nominal wage dynamics in enterprises in December 2020 and in Q1 2021 but their impact will not be significant. In addition, the expected marked and sustainable decrease of inflation in December 2020 (see MACROpulse of 15/12/2020) will be conducive to higher real wage dynamics in the corporate sector.

Slight impact of stricter restrictions on employment

According to GUS data, the dynamics of employment in the sector of enterprises decreased to -1.2% YoY in November vs. -1.0% in October, running above our forecast (-1.7%) and the market consensus (-1.5% YoY). In MoM terms, employment increased by 0.6k in November vs. an increase by 5.9k in October, recording the lowest November increase since 2012. At the same time, employment in November continued to be significantly (by 127.0k) lower from February 2020. The markedly better than expected data on employment in November suggest that the aggregate impact of the restrictions existing before or imposed in November (mainly closed schools and shops in shopping malls as well as limited activity of hotels and restaurants) on employment in November was insignificant. We expect that the resultant of the launch of the support scheme for enterprises affected by the economic consequences of the pandemic (“2.0 shield" – see MACROmap of 30/11/2020) and the expected by us high level of restrictions in December 2020 and in Q1 2021 will be slight changes in corporate employment in the coming months. We expect a marked increase in corporate employment in H2 2021.

Consumption decrease in Q4 may be smaller than we expected

Today’s data on corporate employment in November signal that the registered unemployment rate in December may be lower than our forecast (6.7% vs. 6.1% in November) and it will rise mainly due to seasonal factors. The better-than-expected data on employment signal a slight upside risk to our forecast of consumption in Q4 (-4.0% YoY vs. 0.4% in Q3) though a fuller assessment of this risk will be possible after the publication of data on November retail sales scheduled for Monday. Our scenario of a decline in consumption in Q4 is also supported by consumer sentiment data published today by GUS. Although they point to improved assessment of both the current and the future situation compared to November 2020, these assessments are still at a low level (close to the one recorded in June 2020).

Today’s data on wages and employment in the enterprise sector are neutral for PLN and bond yields, we believe.