Limited scope for increased unemployment, says ING bank
Demand for labour will remain high in Poland while unemployment will struggle to increase, a report by the bank ING has found, despite a worsening economic environment in 2023.
Poland's Central Statistical Office (GUS) said on Tuesday that employment grew by 2.4 percent year on year in October and month on month, by 0.1 percent.
Analysts at ING noted that enterprise-sector employment rose significantly quicker in October than a month earlier and faster than the consensus among economists, by 2.2 percent in each case.
"Demand for labour will remain strong despite symptoms of a slowdown in some sectors, e.g. construction," ING's economists wrote in the report. "A large number of refugees from Ukraine (about 400,000), who have found work in Poland since the start of the war, contributes to this, and they are probably largely unaccounted for in the GUS employment data.
"In connection with the demographic situation, this suggests a maintenance of the tight labour market and little room for growth in unemployment despite a significant economic slowdown, which probably awaits Poland in 2023," the ING analysts continued.
They went on to warn that after a strong start to the year, a slowdown could be seen in many areas of the economy.
"This is most visible in industrial processing, where 7,000 jobs have been lost since January," the analysts said. "Information and communication continue to perform very well (+14,000 jobs), which may be connected with the move to Poland of some companies from the east since the start of Russian aggression. Employment is also growing in retail trade among other sectors, which is probably related to the inflow of refugees to the country."
ING also said that wage growth was weaker than expected, slowing from 14 percent to 13 percent, below the consensus of 14.2 percent.
"Taking into account how strong the demand is for labour, it can be assumed that a lower inclination of companies to raise wages results from preparations for an economic downturn, but they are also preparing company budgets for a large hike in the minimum wage in 2023," ING commented.
The report added that in real terms, pay had fallen steadily since April - and that that would probably not change in 2023 - which is currently resulting in reduced consumer demand, especially for durable goods.
"This is one of the key causes of the slowdown in GDP growth we expect next year," ING said.
The bank went on to say that everything indicated that the labour market would be better than foreseen in the latest central bank (NBP) inflation projections, in terms of both employment and wages.
"This is one of the reasons we believe that a return of CPI (Consumer Price Index - PAP) to the NBP target may take longer than the projection assumes," the bank wrote. "This is reflected primarily in persistently high core inflation."