Statistical effects drove the wage growth down
In accordance with the GUS data published today, nominal wage growth in the sector of businesses employing more than 9 employees slowed down from 13.6% YoY in February to 12.6% YoY in March, running above the market consensus (12.4%) and below our forecast (12.9%). In real terms, after the adjustments made to take into consideration the changes in prices, wages in companies fell by 3.0% YoY in March comparing to a 4.1% drop in February. Annual nominal wage growth was driven down by last year’s high base effect (March 2022 saw the wages grow by 7.2% MoM).
Wage growth structure data for March indicate that growth was driven down primarily by a slower growth in wages in the “mining and quarrying” category (1.8% YoY in March vs. 21.1% in February). In our opinion, this occurred because the effect of bonuses paid out in the mining sector in February had faded (see MACROpulse of 20/03/2023). Wage growth was also driven down to a great extent by a slower growth in wages in the “transport and warehousing management” category (18.7% in March vs. 23.5% in February). We support our conclusion, which says that the nominal wage growth will follow the downward trend again in the quarters to come after a temporary increase seen in Q1 2023 (to 13.3% YoY vs. 12.4% YoY in Q4 2022), and that the said downward trend will also be seen for average wages across the entire economy. Economic slowdown, and a significant inflation drop, which we expect to take place, combined with the related wage pressure decline in the enterprises will be the main factors slowing the growth in wages down in the quarters to come (see MACROmap of 20/03/2023).
Another surprising drop in employment figures
Employment growth in the enterprise sector went down to 0.5% YoY in March compared to 0.8% in February, which is markedly below the market consensus that was consistent with our forecast (0.7%). Comparing to February, the number of employed in March fell by 9.5k, which was the strongest drop for a March since 2020. The strongest year-on-year drop was seen in the “construction” (-1.7% YoY in both February and March) and “industrial manufacturing” (-0.8% YoY in March vs. -0.6% in February) sectors. In our opinion, the increasingly declining employment figures in the processing and construction sectors indicate that the restructuring processes in those sectors are increasing in terms of intensity, the two sectors having been particularly affected by the economic slowdown, which included poorer activity in the construction sector, and by higher prices of energy commodities. Nonetheless, we continue to believe that the drop in employment figures related to those restructuring processes will not be rapid. This scenario is supported by the incoming business survey data for industrial manufacturing, construction and services combined with labour market data showing that the number of people declared by the companies to be laid off is low while the level of vacancies is historically high. We expect the employment in companies to start growing markedly in H2 2023 along with the global and domestic economic upturn.
Wage fund data supports our consumption path forecast
A slower growth in employment combined with a slower decline in real wages in the enterprise sector resulted in an increase in the real wage fund growth rate in the enterprise sector, the rate being the product of employment and average wage adjusted for changes in prices, to -2.5% YoY in March vs. -3.3% in February. Consequently, the real wage fund growth for Q1 2023 fell to -2.5% YoY vs. -2.0% in Q4 2022. The data is therefore consistent with our real consumption slowdown forecast (to -2.0% YoY in Q1 2023 vs. -1.5% in Q4 2022). It will be possible to assess private consumption trends more precisely when we see the retail sales data for March, which is to be published on Monday.
In our opinion, today’s worse-than-expected data on employment and average wages in the domestic enterprise sector are neutral for the PLN and the yields on Polish bonds.