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Marked growth in employment despite second wave of the pandemic

Strong real wage growth in December

In accordance with GUS data published today, the nominal wage growth rate in the sector of enterprises employing more than 9 people rose to 6.6% YoY in December vs. 4.9% in November, running well above market expectations (4.8%) and our forecast (4.5%). In real terms, wages in enterprises, adjusted for price changes, went up by 4.1% YoY in December, which is the strongest growth rate since July 2019. The significant real wage growth rate seen in December was driven by a strong increase in nominal wages and a marked drop in inflation (see MACROpulse of 15/01/2021). Consequently, the average real wage growth rate for the last three months was 2.5% YoY in December vs. 1.9% in November, running only slightly below that recorded in February, when the pandemic did not have a strong adverse impact on the labour market yet. In accordance with the GUS statement, wage growth between November and December was driven up by payments of quarterly bonuses, annual bonuses, length-of service awards, discretionary bonuses, as well as severance pay. Based on the monthly nominal wage growth rate (8.9%), being the highest growth rate in December since 2014, the scale of such payments was much bigger compared to previous years. At the same time, such a high monthly wage growth rate in December indicates that the restrictions imposed due to the second wave of the pandemic had a limited impact on the rate of growth in wages, which is in line with our assesment made a month ago (see MACROpulse of 17/12/2020).

Employment growth despite strong administrative constraints

According to the Central Statistical Office (GUS) data, employment growth in enterprises accelerated to -1.0% YoY in December from -1.2% in November, clearly above the market consensus equal to our forecast (-1.2% YoY). Employment increased by 10.1k MoM in December, compared with an increase of 0.6k in November, the strongest December gain since 2017. Despite the recorded increase, employment in December was still significantly (by 116.9k) lower than in February 2020. The sharply better-than-expected December employment data suggests that the combined impact of the restrictions already in force and those introduced in December (including school closures, as well as restrictions on hotel and restaurant operations) on employment in December was negligible. It was partially mitigated by the opening of shopping malls before Christmas. We expect employment growth in enterprises to accelerate in H2 2021 in line with our assumption that the pandemic will gradually fade.

Consumer sentiment survey results support consumption in Q1

Today's better-than-expected data on employment and average wages in the enterprise sector signal a slight upside risk to our Q4 consumption forecast (-4.0% YoY vs. 0.4% in Q3), as well as to the wage path throughout 2021, but a fuller assessment of this risk will only be possible after the publication of December retail sales data tomorrow. Our scenario of rising consumption growth rate in Q1 to -1.0% YoY is supported by January consumer sentiment data published today by the Central Statistical Office (GUS). While it showed a slight deterioration in assessments of the current economic situation, respondents' expectations for the future improved. Together with the standard indices of the consumer sentiment, responses to additional questions related to the epidemic situation were published. Particularly noteworthy is respondents’ gradually decreasing fear of losing their jobs and worsening their financial situation due to the pandemic. In our view, this will support consumption in Q1.

Today's better-than-expected data on wages and employment in the corporate sector is, in our view, slightly positive for the PLN exchange rate and bond yields.