Slight acceleration of wage growth in December

In accordance with GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 persons rose to 7.3% YoY in December vs. 6.5% in November, running above our forecast (7.2%) and market consensus (6.9%). Real, adjusted for the changes in prices, corporate wages rose by 5.1% YoY in December vs. 3.9% in November. In our view, the main factor behind faster wage growth in the sector of enterprises were the variable components of remuneration paid out in mining which boosted monthly wage growth in this sector stronger than in December 2016. Like in previous months, conducive to faster wage growth was growing wage pressure resulting from improvement in the labour market. Statistical effects related to unavourable difference in the number of working days, which limited the wage growth for employees engaged in piecework, had an opposite impact.

Another record employment increase

According to GUS data, corporate employment rose by 11.8k MoM in December (a record high growth in December) vs. a 17.2k increase in November (which was also a record high growth for that month). Consequently, the annual employment dynamics rose to 4.6% in December vs. 4.5% in November.

Although, the record employment growth in November can be attributed to the temporary factor in the form of reduction of retirement age from 1 October (slower employment growth in October and faster in November due to termination and resumption of employment by people who take pension but simultaneously decide to continue working), the record employment growth in December is highly surprising, considering growing difficulties of companies in finding skilled labour. In our view, the relatively sharp employment growth in December can be attributed to weather conditions being more favourable than last year which supported increase in employment in construction companies. The data on employment in December indicate that, despite tightening labour market, companies succeed in increasing employment. In our view, increase in employment is supported by gradual acceleration in real wage growth, which encourages economically inactive persons to enter the labour market, as well as increasing registered employment of immigrants from Ukraine. 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 rate at the highest level since September 2008

We estimate that real wage fund (employment times average wages) growth rate in enterprises amounted to 9.9% YoY in December (the highest since September 2008) vs. 8.6% in November. In Q4 2017 real wage fund growth accelerated to 9.4% vs. 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 slightly positive for PLN and yields on Polish bonds, we believe.

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