Wage growth is losing momentum

According to GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 people dropped to 4.7% YoY in October vs. 5.6% in September, running above the market expectations (4.6%) and below our forecast (4.8%). In real terms, corporate wages, adjusted for the changes in prices, increased by 1.6% YoY in October. The decrease in the wage dynamics between September and October resulted from the statistical effect in the form of an unfavourable difference in the number of working days (in September 2020 the number of working days was higher by one from 2019 while in October 2020 it was by one day lower than the year before) which was conducive to lower wage dynamics of employees engaged in piecework. In our view, lower growth rate of wages between September and October resulted also from a weaker from the previous year effect of bonus and award payments, mentioned in the GUS statement. This view is supported by a low, against the historical background, increase in wages recorded in October 2020 in monthly terms. We expect the annual nominal wage dynamics in the corporate sector to stabilize in the coming months at a level close to 4%. Wage growth will be limited by the expected by us marked increase in unemployment in Q4 (further decrease in wage pressure) and the measures taken by enterprises to limit labour costs amid the second wave of the pandemic.

Employment growth is increasingly slow and still far from February 2020 level

According to GUS data, the dynamics of employment in the sector of enterprises increased to -1.0% YoY in October vs. -1.2% in September, running in line with our forecast and the market consensus (-1.1% YoY). In MoM terms, employment increased by 5.9k in October vs. an increase by 17.4k in September, recording the highest October increase since 2016. According to GUS statement, the increase in employment in October compared to September resulted from further restoration of pre-pandemic working times and from new employment. It is worth noting that the monthly employment dynamics have markedly decreased compared to previous months (0.1% MoM in October vs. 0.3% in September, 0.7% in August, and 1.1% in July). At the same time, employment in October continued to be 127.6k lower from February 2020, namely the last month before the strong pandemic effect on the labour market. This points to a visible slowdown of the improvement in the labour market, consistently with our scenario assuming its slow return to equilibrium. This view is also supported by data on the number of people employed where a significant slowdown of its growth has also been recorded in recent months (see MACROmap of 28/9/2020). At the same time, the recently imposed administrative restrictions aimed at containing the second wave of the pandemic and the accompanying relaunch of support tools for enterprises, such as stoppage benefit and reduction of working time, will have a negative impact on employment in the coming months, leading even to its temporary decrease.

Consumption to markedly decline in Q4

The data released today indicate that October was yet another month in which the negative impact of COVID-19-drived regulations (reduced working time) on employment and consumption was gradually abating, although the improvement in the labour market is increasingly slow. In addition, it will be limited in the coming months by the tightening of the administrative restrictions due to the second wave of the pandemic. Today’s data are consistent with our forecast assuming that the registered unemployment rate will increase to 7.1% at the end of Q4 vs. 6.1% at the end of Q3, while consumption dynamics will decrease to -3.6% YoY in Q4 vs. 1.0% in Q3 (see MACROmap of 26/10/2020). Our forecast of consumption decline in Q4 is supported also by the data published today by GUS on consumer sentiment pointing to a marked decrease in the evaluation of both the current and the future situation which stood at the lowest level since May 2020. Such data structure is consistent with our scenario assuming a W-shaped profile of consumer sentiment in the coming months (see MACROmap of 5/10/2020).

Today’s data on wages and employment in the enterprise sector are neutral for PLN and bond yields, we believe.

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