Average wage in the enterprise sector increased by only 7.6% yoy in July, compared to a 9.0% increase in June. The consensus had not anticipated such a sharp slowdown in wage growth, expecting it to decline to 8.6%. Several factors contributed to this abrupt deceleration in wage growth in July:

• Firstly, a high base effect from July 2024 in the manufacturing sector, most likely driven by one-off bonuses, which pushed the current reading for manufacturing down to 7.6% yoy from 8.7% the previous month.
• Secondly, a high base from the previous month in the mining sector, generated by phased wage raises in one mining company.
• Thirdly, less generous payments related to Forester’s Day compared to the previous year, which resulted in a decline in wages in the “agriculture, forestry, hunting, and fishing” category by 8% yoy in July.
• Fourthly, a high base effect caused by the rescheduling of bonus payments in the energy sector, which were paid in June this year instead of July as in the previous year.

Thus, the surprisingly large drop in wage growth was largely driven by factors of a one-off nature. Nonetheless, this does not alter the fact that wage growth is steadily trending downward, although the pace of deceleration indicated by the July reading is unlikely to be sustained in the coming months. In the near term, we expect wage growth figures to remain above 8%, which still does not align with what we would anticipate given the current macroeconomic environment (particularly in relation to inflation and GDP growth). Nevertheless, the direction of wage dynamics is clearly downward. We approach today’s reading with caution, as we did with the June data — we believe one figure was essentially a correction of the other, and that no significant developments in wage trends have occurred in recent months. The wage momentum, however, which after today’s reading stands near 8%, remains a positive sign.

Annualized wage momentum (%, SA)

Source: Statistics Poland, Pekao Analyses

Average employment in the enterprise sector declined by 0.9% yoy in July, compared to a 0.8% decrease in June, representing a negative surprise relative to the consensus forecast of -0.8%. According to the StatOffice, the number of full-time equivalents fell by 4,000 positions compared to the previous month. However, we have several reservations regarding the July employment data.

Specifically, we observed a phenomenon similar to that seen in June concerning the “manufacturing” and “professional, scientific, and technical activities” sections. Recall that in June, the StatOffice recorded a decline of 10,000 full-time equivalents in manufacturing, offset by a comparable increase in professional activities. We later learned this was due to changes in the business profiles of certain surveyed firms. Surprisingly, in July we observed the opposite movement — employment in professional activities dropped by 10,000 full-time equivalents mom, while manufacturing employment rose by 5,000.

We are not yet certain whether these shifts have the same underlying causes as those seen in June. If they do, we can infer that the actual change in manufacturing employment was a decline of 5,000 full-time equivalents mom, which largely explains today’s disappointing employment figures. Contributions to the negative surprise also came from the trade and transport sections.

Nonetheless, the July data do not alter our long-held view — employment remains stagnant, and arguments supporting its recovery are likely to emerge more strongly around the turn of the year, with industry as the main potential driver of a potential revival.

Change in employment by sector (thousands mom)

Source: Statistics Poland, Pekao Analyses

Cumulative employment change since January of the year (thousands)

Source: Statistics Poland, Pekao Analyses