Average wage in the enterprise sector increased by 8.4% yoy in May, compared to a 9.3% yoy rise in April. This result is slightly below our forecast (8.7%) and market expectations (8.8%). The downward surprise in wage growth represents an important signal for analysts and the Monetary Policy Council (MPC). It appears that, as anticipated, the April spike in wage growth was purely a one-off effect. Moreover, today's lower-than-consensus reading effectively dispels concerns about the persistence of wage pressure that emerged after April’s data release. A detailed breakdown of the data reveals several expected developments:

• a moderation in wage growth in the agriculture and forestry sector, from an impressive 38% yoy to a ‘modest’ 12.1%, following the dissipation of bonuses effect observed in April;
• a slowdown in wage growth in the mining sector from 7.1% yoy to 3.3%, attributable to a similar effect as that seen in agriculture and forestry;
• lower wage growth in trade (5.9% yoy compared to 7.3%) due to the fading Easter effect and elevated pay for extra working days on Sundays.

Beyond these points, the May wage report presents no surprises. It suggests that wage growth momentum will likely continue to decline over the coming months, providing further rationale for a potential reduction in interest rates across the full range of instruments currently available to the MPC. Nonetheless, as we have noted on numerous occasions, the Council remains cautious, and July is unlikely to be the time for another rate cut. In our view, the next reduction will probably take place after the summer, with labor market data from the vacation period expected to support such a move.

Wage momentum (% yoy, SA), i.e. what the annual wage growth would be if the current monthly growth rated after seasonal adjustment remained unchanged the entire year

Source: StatOffice, Pekao Research

Average employment in the enterprise sector fell by 0.8% yoy in May, mirroring the decline observed in April and representing a downside surprise relative to consensus expectations (-0.7%). According to the StatOffice, the number of full-time equivalent positions decreased by 14k compared to the previous month. This is a rather concerning development, as the May reading approached the threshold between -0.8% and -0.9%, posing a significant risk to our existing scenario of a gradual employment recovery in the second half of the year. However, we remain cautiously optimistic for now. A sectoral breakdown suggests that the main contributors to today’s disappointing figures were manufacturing, trade, transportation, and administration. We will closely monitor June’s data for signs of reversal in these negative trends.

Cumulative change in employment since January of a given year (thous. full-time positions)

Source: StatOffice, Pekao Research