ING also said wage growth was weaker than expected, falling from 14% to 13%, below the consensus of 14.2%.
Rafal Guz/PAP
Labor demand will remain high in Poland while unemployment will struggle to rise, according to a report by ING Bank, despite a deteriorating economic environment in 2023.
Poland’s Central Statistical Office (GUS) said on Tuesday that employment rose 2.4% year-on-year in October and 0.1% month-on-month.
ING analysts noted that business sector employment grew much faster in October than a month earlier and faster than the consensus among economists, by 2.2% in each case.
“Labour demand will remain strong despite symptoms of a slowdown in some sectors, for example construction,” ING economists wrote in the report. “A large number of Ukrainian refugees (about 400,000), who have found work in Poland since the start of the war, contribute to this, and they are probably largely absent from the GUS employment data.
“In connection with the demographic situation, this suggests a continued tight labor market and little room for unemployment to rise despite a significant economic slowdown, which is likely to await Poland in 2023”, continue ING analysts.
They went on to warn that after a strong start to the year, a slowdown could be seen in many sectors of the economy.
“This is particularly visible in industrial transformation, where 7,000 jobs have been lost since January,” analysts said. “Information and communication continue to perform very well (+14,000 jobs), which may be linked to the relocation to Poland of certain companies from the East since the start of the Russian aggression. Employment is also growing in retail trade among other sectors, which is likely linked to the influx of refugees into the country.”
ING also said wage growth was weaker than expected, falling from 14% to 13%, below the consensus of 14.2%.
“Given the strength of labor demand, one might assume that companies’ lower propensity to increase wages is a result of preparations for an economic downturn, but they are also preparing company budgets for a strong minimum wage hike in 2023,” ING commented.
The report adds that in real terms, wages have fallen steadily since April – and this is unlikely to change in 2023 – which is currently driving reduced consumer demand, especially for durable goods.
“This is one of the main causes of the slowdown in GDP growth that we expect next year,” ING said.
The bank went on to say that there was every indication that the labor market would be better than expected in the latest central bank (NBP) inflation projections, both in terms of employment and wages.
“This is one of the reasons why we believe that a return of the CPI (consumer price index – PAP) to the NBP target may take longer than the projection assumes,” wrote the bank. “This is mainly reflected in the persistence of high underlying inflation.”