Higher inflation curbs the real wage fund growth

Nearly two-digit wage growth in August

In accordance with the GUS data published today, nominal wage growth in the sector of businesses employing more than 9 employees increased from 8.7% YoY in July to 9.5% YoY in August, running above our forecast (8.9%) and the market consensus (8.8%). In real terms, after the adjustments made to take into consideration the changes in prices, wages in companies rose by 3.8% YoY in August comparing to a 3.6% growth in July. Wages growth was driven up by a favourable difference in terms of the number of business days (in August 2021, there were two days more than in August 2020, while in July 2021, there was one business day less comparing to the previous year). A gradually growing pressure on wages in enterprises signalled in the business sentiment survey is another factor conducive to a faster growth in wages. The survey results are indicative of an increasing barrier for growth caused by high employment costs in manufacturing, construction and services sectors signalled by the companies surveyed by GUS, and show that the percentage of companies surveyed by the NBP (Quick Monitoring) that report growth or no changes in the wage pressure is growing. In Q2, that percentage was the highest since Q1 2020, and 18% of businesses reported an increase in the wage pressure comparing to Q1. However, it is worth noting that the barrier caused by high labour costs in most sectors covered by the GUS survey is still smaller than in 2019, which was the period of high demand for workforce and increasing symptoms of overheating, and the share of businesses surveyed by the NBP which are planning to increase wages significantly remains stable at ca. 5%. In our opinion, it indicates that the wage pressure related to a favourable situation in the labour market will be growing gradually.

Employment growth slowdown in August surprisingly strong

Based on GUS data, employment growth in the enterprise sector went down to 0.9% YoY in August compared to 1.8% in July, which is much below the market consensus that was consistent with our forecast (1.1%). This significant decline in the annual employment growth was primarily caused by last year’s strong high base effect connected with a quick restoration of employment after the first wave of the pandemic. In monthly terms, the number of employed in August fell by 9.7k comparing to a 2.4k growth in July, which comes as a huge surprise. Although it is not unusual to see the employment rate falling in August, the scale of last August's decline was unprecedented in the data history. The surprising, significant decline in employment in August was most likely connected with employment adjustments in companies using the financial shield, where one of the conditions to obtain support was to keep the staff number unchanged during the period when the support was provided. Following the decline in August, the number of employed was lower by 93.9k than in February 2020, which was the last month before the pandemic.

We believe that the employment decline in August was transitional, and in the coming months we will see a significant growth undisturbed by the fourth wave of the pandemic. That scenario is supported by an increasing barrier caused by the lack of qualified workforce in the manufacturing, services and construction sectors signalled in the business sentiment survey, a huge number of job offers (higher than it was before the pandemic), and by the share of companies predicting that employment will grow in Q3, which is the highest in the history of the NBP’s survey.

Higher inflation curbs the real wage fund growth

The real wage fund growth rate in the enterprise sector being the product of employment and average wages adjusted to take into consideration the changes in prices went down from 5.4% in July and 7.5% in Q2 to 4.7% YoY in August. This significant decline was caused by the slowdown in employment growth discussed above and a significant inflation rise in August (see MACROpulse of 15/09/2021). The real wage fund growth slowdown is consistent with our forecast in which the dynamics of consumption will fall from 13.3% in Q2 to 4.4% YoY in Q3.

Today’s data on wages and employment in the enterprise sector are neutral for the PLN and the yields on bonds.