According to GUS data published today, nominal wage dynamics in the sector of enterprises employing above 9 people increased to 7.1% YoY in January vs. 6.2% in December 2019, running slightly above our forecast (7.0%) and the market consensus (6.7%). In real terms, corporate wages, adjusted for the changes in prices, rose by 2.6% YoY in January vs. 2.8% increase in December.

The significant acceleration in wage growth in January resulted from a higher-than-last year increase in the minimum pay (in 2019 it was raised by 7.1% while in 2020 it rose by 15.6%). We estimate that the increase in the wages of the lowest earners is conducive to increasing the total wage dynamics by ca. 1.1 percentage points (see MACROmap of 7/10/2019). However, we should bear in mind that the increase in the minimum wage contributes towards increasing the wages of higher earners – the employers increase their salaries to maintain adequate relations between remunerations at different positions in the wage grid. We believe that this effect will be gradually materializing in subsequent months, boosting the increase in total wages. Therefore, today’s data do not alter our forecast of wage growth in the national economy in the whole 2020 (7.4% vs. 7.2% in 2019). Our scenario, assuming only a slight increase in the wage dynamics, is supported by the results of the January NBP business survey (Quick Monitoring). They indicate that the scale of the forecast pay rises in 2020 will not substantially increase compared to 2019.

Employment data review smaller from last year

According to GUS data, wage dynamics in the sector of enterprises amounted to 1.1% YoY in January vs. 2.6% in December, running significantly below our forecast (1.8%) and the market consensus (2.0%). In MoM terms, employment increased by 44.9k. The sharp increase in MoM employment resulted from the annual review of data on employment in microenterprises (employing less than 9 persons). Companies in which employment exceeded 9 persons last year were added to the category of entities employing at least 10 persons. The increase in employment in January 2020 was visibly lower from last year (it then amounted to 135.7k), being conducive to decreasing its annual dynamics. The smaller scale of the review is consistent with the currently observed deceleration of the improvement in the labour market. A precise forecast of the employment growth in January is hard to achieve, therefore today’s negative surprise in this respect should not be treated as a signal of a marked deterioration of the outlook for the labour market.

Stabilization of private consumption dynamics in Q1

We estimate that the real wage fund growth rate (the employment times the average salary) in enterprises amounted to 3.8% YoY in January vs. 5.5% in December 2019 and 5.6% in Q4 2019. Due to the aforementioned review of data on employment in microenterprises, the data on real wage fund dynamics in December 2019 and January 2020 are not fully comparable. A fuller assessment of real wage fund trends will be possible in March after the publication of the February data on wages and employment. The in-line-with-expectations increase in wages in January supports our forecast of stabilization of private consumption dynamics in Q4 2019 and Q1 2020 (3.4% YoY).

In our view, today’s data on salaries and employment in the enterprise sector are neutral for PLN and bond yields.

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