Strong growth in wages in November

Strong growth in wages in November

In accordance with the GUS data published today, nominal wage growth in the sector of businesses employing more than 9 employees increased from 8.4 YoY in October to 9.8% YoY in November, running markedly above our forecast (9.0%) and the market consensus (8.9%). In real terms, after adjusting for price changes, wages in businesses rose by 1.9% YoY in November vs. a 1.5% growth in October. Despite a slight acceleration in the growth of wages in real terms, the average three-month growth fell from 2.7% YoY in October to 2.0% in November, reaching the lowest level since November 2020. It is also worth noting that the month-on-month increase of average wages seen in November (by 1.8%) was also the highest growth recorded for a November since 2011. In accordance with the press release published by the GUS, the reasons behind the increase included the payment of quarterly bonuses and Miner’s Day rewards as well as annual bonuses, discretionary bonuses, wage rises and retirement severance payments. It suggests that the significant acceleration of year-on-year wage growth in November was to some extent influenced by the shifts in the dates of payment of variable remuneration components, which in many companies are usually paid out in December.

In accordance with the press release published by the GUS, the highest growth in wages comparing to the previous month was reported in the “mining and quarrying” category (by 34.1%). We assess that the wage growth increase in this section of industry contributed to the increase in the annual wage growth between October and November by 0.2 pp. A negligent scale of impact of this factor on the annual wage growth rate in the sector of enterprises in general suggests that the gradually growing wage pressure also contributed to the significant growth of the latter in November. This assessment is supported by a relatively high vacancy rate compared to the unemployment rate across the entire economy, which stood at 1.30% in the third quarter, much above the levels observed in 2019, prior to the outbreak of the pandemic. In our opinion, a record number of quarantined people (on average 481.7k per month) and the related payments of higher wages for overtime work in the manufacturing sector also contributed to the wage growth acceleration in November. We expect that the growing wage pressure in the months to come will support the annual wage growth, which we expect to run at around 10%.

Employment growth surprisingly high

Based on GUS data, employment growth in the enterprise sector slowed down to 0.7% YoY in November vs. 0.5% in October, running above the market consensus that was consistent with our forecast (0.5%). Month on month, employment increased by 12.6k in November, compared to a 3.9k growth in October. Despite a significant growth, the number of employed in November was still lower by 82.2k than in February 2020, which was the last month before the outbreak of the pandemic. According to the GUS, the growth resulted, among others, from employers hiring new employees, including seasonal workers. In our opinion, the surprisingly high growth in employment in November shows that enterprises are ready to increase the number of employees despite the fourth wave of the pandemic and uncertainties regarding the further development of the situation, which makes it possible for them to increase their production capacities. Faster-than-expected employment growth in November seen in the context of the growing barrier related to the lack of a qualified workforce reported by the enterprises is driving the wage pressure up.

Significant wage fund growth slowdown in Q4 2021

The real wage fund growth rate in the enterprise sector being the product of employment and average wage adjusted to take into consideration the changes in prices went up from 2.0% YoY in October and 4.4% YoY in Q3 to 2.6% YoY in November. The growth resulted from a combination of the employment and wages growth acceleration discussed above and further inflation growth in November (see MACROpulse of 15/12/2021). The figures describing the real wage fund growth in October and November are indicative of a significant decline of its annual dynamics in the fourth quarter comparing to Q3. It supports our forecast in which the consumption dynamics will sharply fall from 4.7% YoY in Q3 to 3.1% YoY in Q4. We also expect further deterioration in consumer sentiment, which is primarily caused by strong inflation rise and soaring COVID-19 cases to drive the consumption growth down in the fourth quarter.

In our opinion, today’s data on wages and employment in the enterprise sector have a slight positive impact on the PLN and the yields on bonds.