Surprisingly strong wage growth in September

According to GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 people rose to 5.6% YoY in September vs. 4.1% in August, running markedly above the market consensus (4.5%) and our forecast (4.3%). Thus, the annual nominal wage growth has reached the highest level since March 2020. In real terms, corporate wages, adjusted for the changes in prices, increased by 2.4% YoY in September the (highest increase since February 2020, namely since the last month in which the pandemic had no significant impact on the labour market in Poland) vs. a 1.2% increase in August. The significant increase in the wage dynamics in September is a big surprise in the light of continuing signals of lower wage pressure resulting from higher unemployment and reduced recruitment plans of companies due to the uncertainty about the course of the second wave of the COVID-19 pandemic. According to GUS statement, higher wage dynamics in September resulted i.a. from the payment of bonuses, quarterly, annual and jubilee awards and retirement benefits. A fuller assessment of the reasons for the increase in wages in September will be possible after seeing GUS data on wage dynamics in respective sectors. Today’s data on corporate wages pose an upside risk to our forecast of wage growth in the whole economy in Q3 and Q4 (3.2% YoY and 3.4%, respectively). Thus, higher-than-we-expected wage dynamics in the corporate sector in the coming months will be a factor mitigating the impact of the second wave of the pandemic on consumption and economic growth.

Employment is growing but is still far from the level in February 2020

According to GUS data, the dynamics of employment in the sector of enterprises increased to -1.2% YoY in September vs. -1.5% in August, running below the market consensus (-1.1% YoY) and our forecast (-0.9%). In MoM terms, employment increased by 17.4k in September vs. an increase by 43.0k in August, recording the highest September increase on record. According to GUS statement, the increase in employment in September compared to August resulted from the restoration of pre-pandemic working times and from new employment. However, employment in September continued to be 133.5k lower from February 2020, namely the last month before the strong pandemic effect on the labour market. A fuller assessment of corporate employment trends will be possible after the scheduled for Friday publication of data on the number of persons employed in the sector of enterprises which is a better indication of demand for employment in companies from the number of persons employed (see MACROmap of 28/9/2020).

Downside risk to consumption and GDP in Q4 despite faster wage growth

The data released today indicate that September was yet another month in which the negative impact of COVID-19-drived regulations (reduced working time) on employment and consumption was gradually abating. Athough the markedly faster than we expected wage growth signals an upside risk to the real wage fund and consumption in Q4 2020, this effect will more than offset by the significant restrictions imposed during the weekend due to a deeper than expected deterioration of the epidemiological situation and the accompanying expected decrease in households’ mobility and lower households’ propensity to consume. Consequently, we now see a significant downside risk to the dynamics of consumption and GDP in Q4 2020. We will present our macroeconomic scenario in the next MACROmap.

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

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