Salary growth slightly slowing down

In accordance with the GUS data published today, nominal salary growth rate in the sector of companies employing more than 9 employees fell from 4.8% YoY in January to 4.5% YoY in February, running in line with our forecast and below the market consensus (4.9%). In real terms, after the adjustments made to take into consideration the changes in prices, salaries in companies rose by 2.0% YoY in February comparing to +2.2% in January. The deceleration in the salary growth between January and February was caused by the last year's high base effect (in February 2020, salaries in the enterprise sector grew by 0.9% MoM, which was the strongest growth for a February since January 2015). Data on the salary growth rate in the enterprise sector in February is consistent with our scenario, in which the nominal salary growth will slow down significantly across the entire economy, going down to 2.8% YoY in Q1 2021 vs. +5.0% in Q4 2020, largely due to pay freezes in state administration units, salary pressure in the enterprises stabilising on a low level as shown by the results of a business survey, and a significant drop in the percentage of companies planning to raise salaries in Q1 2021. We maintain our forecast, in which the salary growth driven by last year’s low base effect observed for salaries in the enterprise sector will slightly accelerate across the entire economy in Q2 2021, going up to 3.3% YoY. The factors that will be slowing the salary growth down in the months to come include the currently seen third wave of the COVID-19 pandemic and the tightening of the related administrative restrictions, which will be driving down the salary pressure in the enterprise sector and the demand for work in the sectors that will be affected by restrictions the most.

Particularly strong employment growth in February

In accordance with the GUS data, the employment growth rate in the enterprise sector in February stood at -1.7% YoY comparing to -2.0% in January, which was above our forecast that was consistent with the market consensus (-2.0%). In monthly terms, the number of employed grew by 19.9k, and it was the highest growth recorded for a February since 2008. In accordance with the GUS statement, the employment growth in February resulted from hiring new employees and upward adjustments being made to the working time bases, back to pre-pandemic levels. In our opinion, the significant employment growth that was seen in February mainly resulted from increasing the number of FTEs in the manufacturing sector, where a relatively quick growth in the demand for workforce is primarily related to the global trade recovery and an increase in the number of export orders. We expect the employment growth to slow down strongly in March in relation to the third wave of the pandemic and the related tightening of restrictions, the slowdown being driven by downward adjustments to working time bases and an increase in the number of individuals receiving sickness benefits and carer’s allowance. We maintain our scenario, in which we expect a significant, lasting growth of employment in enterprises to take place in the second half of 2021, i.e. when the negative impact of the employment adjustments ceases as a result of the labour market being “unlocked” (vanishing of the positive impact of the first financial shield on employment).

Real wage fund stagnation in the enterprise sector

Data on employment and salaries in the enterprise sector published today is indicative of stagnation in terms of the annual real wage fund growth rate being the product of employment and average salary (0.3% YoY in February vs. 0.1% in January). The data is therefore consistent with our forecast in which the consumption growth rate will go up from -3.0% in Q4 2020 to 0.0% YoY in Q1 2021. However, the third wave of the pandemic and related regional restrictions imposed in March 2021 as well as the expected tightening of those restrictions in the pre-Easter period carry the downward risk for that forecast. Our "suppressed consumption” scenario is also supported by the consumer sentiment survey results released by the GUS today. They show that even though the main sentiment indicators went up a bit, they still remain low, and the percentage of respondents who consider the current epidemiologic situation to present a huge or average threat to their own health rose slightly and still remains above 80%. It should also be noted that the consumer sentiment survey was carried out by the GUS in the first half of March, i.e. when the restrictions were not tightened yet (which is highly likely to take place in the weeks to come).

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

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