Only 6% of the Czech firms plan to hire more staff in Q1 2018, up from 4% planning to do so in Q4’17 and same as a year ago, the regular Manpower survey among 750 firms published on Tuesday showed. At the same time, only about 3% of the respondents plan to cut staff in January-March 2018, same as in Q4’17, but down from 5% a year ago. The majority of firms or some 90% (down from 93% in Q4), do not plan to change their staff numbers. Thus, the net employment outlook was at 3%, up from 1% in Q4 and a year ago. ManpowerGroup CR CEO Jaroslava Rezlerova commented that despite the fact that the first quarter is usually the worst period in terms of employment, the reported net employment outlook (+5%, seasonally adjusted) was the best prediction for Q1 in the history of the survey since 2008 and that can be sign of continuing optimism of Czech labor market with the lowest unemployment in Europe. Still, she pointed that companies increasingly complain that they cannot find enough suitable candidates, not only for jobs requiring specialized skills in IT and engineering, but also for non-qualified jobs in manufacturing and logistics. Rezlerova said that 42% of large companies, especially in the automotive sector, logistics and call centers, plan to increase the number of vacancies. Staff numbers are projected to increase in nine out of 10 industrial sectors in Q1 with outlooks improving q/q in seven sectors. In particular, utilities sector reports the strongest of the ten industry sector outlooks for Q1 with the quarterly improvement also being the biggest. By contrast, the weakest outlook is reported in the mining sector despite the fact that hiring plans are somewhat stronger q/q.
The share of unemployed people aged 15-64 fell further down to 3.5% at end-November, the lowest level in the last nine years and the increasing labor shortages have found expression in nominal wage growth accelerating significantly to 7.6% y/y in Q2 and remaining quite robust at 6.8% y/y in Q3. Going forward, we may expect the unemployment rate to continue decreasing (after potential slight seasonal increase during the winter months and around the end of the year when fixed-term labour contracts expire) on the back of the continued economic expansion and job creation, but marked decrease is unlikely given the reported increase in the lack of qualified workforce. If the robust economic dynamics is preserved and vacancies continue increasing, but firms continue facing problems to find adequately trained workforce and the import of foreign workers remains insufficient, we may expect upward wage pressures to prevail going forward, also boosted by the approved administrative changes such as the increases of the teachers’ and public sector employees’ wages as of November and the minimum wage hike next year. This would support even stronger domestic demand, household consumption in particular, but also translate into higher cost pressures on firms, and hence, higher inflation. Continuing strong upward nominal wage pressures, labor productivity growth potentially appearing unable to compensate for the real wage growth, as well as the crown’s firming at a slower-than-expected pace would support CNB’s plan for further interest rate hikes next year, in our view. We do not expect rates to be hiked next week (on Dec 21) as although the real economy data indicate growing demand-driven inflationary pressures, there seems to be no urgency of hiking the 2-week repo rate already this month instead of waiting for the February monetary policy meeting when the updated macroeconomic forecast is also due.