Slower wage growth in November

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons dropped to 6.5% YoY in November vs. 7.4% in October, running below our forecast (6.9%) and market consensus (7.1%). Real, adjusted for the changes in prices, corporate wages rose by 3.9% YoY in November vs. 5.2% in October.

In our view, the main factor behind slower wage growth in the sector of enterprises was the abatement of the effect of changed timing of variable component of remuneration paid in some branches in October, as reflected by a sharp – against the backdrop of previous years – increase in wages in that month (2.3% MoM, the highest since 2007). In our view, a temporary factor behind higher wage dynamics in October may have been the severance pay for people who became entitled to retire following the reduction of the retirement age. Negative for the wage growth rate in November was also the unavourable difference in the number of working days which lowered the growth rate of wages for piece work. In October 2017 the number of working days was 1 day higher than in 2016 while in November 2017, including the additional free day granted by employers in November due to the Independence Day which fell on a Saturday, it was the same as the year before. The total negative impact of the said factors on wage growth was, like in previous months, limited by growing wage pressure resulting from improvement in the labour market.

Record employment growth despite supply-side barriers and reduction of retirement age

According to GUS data, corporate employment rose by 17.2k MoM in November (a record high growth in November) vs. a 5.0k increase in October. Consequently, the annual employment dynamics rose to 4.5% in November vs. 4.4% in October. The record employment growth in November is highly surprising, considering growing difficulties of companies in finding skilled labour, and the reduction of retirement age from 1 October 2017.

The data on employment in November indicate that, despite tightening labour market, companies have succeeded in increasing employment fast while the negative impact of reduced retirement age on the number of employees is limited by the fact that pensioners often go on working. In subsequent quarters we expect a gradual slowdown of the improvement in the labour market and a mild reduction of the annual employment growth, both in the corporate sector and in the entire economy (see MACROmap of 11/12/2017).

Real wage fund growth is slowing down

We estimate that real wage fund (employment times average wages) growth rate in enterprises amounted to 8.6% YoY in November vs. 9.8% in October and 8.6% in Q3. This signals an upside risk to our forecast in which private consumption growth will drop in Q4 and will amount to 4.3% YoY vs. 4.8% in Q3.

Today's data on corporate wages and employment are neutral for PLN and yields on Polish bonds, we believe.

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