Real wages are projected to increase by 14% in 2024, surpassing pre-war levels by the end of this year, according to the National Bank of Ukraine in its recently published October Inflation Report.
"It is expected that (they) will continue to rise due to significant competition among employers for labor. This, along with a soft fiscal policy, will contribute to further growth in consumer demand," noted the NBU.
According to the document, the National Bank has revised its forecast for real wage growth this year from 9.7% to 14%, and for next year from 5.8% to 6.5%. In 2022, real wages decreased by 11.4%, followed by a 3.7% increase in 2023.
"The ongoing labor shortage in the job market continues to fuel wage growth. Specifically, in the second quarter of 2024, average real wages increased by 17.6% year-on-year, while nominal wages rose by 22.1% year-on-year. According to available indirect data, high rates of nominal wage growth have persisted into the third quarter," indicated the NBU.
At the same time, it was noted that increased inflationary pressure has caused a certain slowdown in the growth rate of real wages, although they remained quite high and continued to support private consumption.
It is clarified that after a 17.4% increase last year, nominal wages are expected to rise by another 21% this year and by 16% next year.
According to the National Bank, the unemployment rate in the economy, which rose from 9.8% to 21.1% in 2022 and decreased to 18.2% in 2023, will continue to gradually decline due to growing demand for labor, but will remain above pre-full-scale invasion levels.
"It will be determined by the prolonged preservation of imbalances in the labor market primarily due to the limited supply of skilled labor, which will be affected by the consequences of the war, including difficulties in reintegrating demobilized individuals into the workforce," noted the NBU.
The central bank added that unemployment will also be constrained by migration processes and the subsequent adaptation of migrants to life abroad, reducing the likelihood of their mass and rapid return to Ukraine. "Due to migration and changes in the structure of the economy, the impact of imbalances in the labor market will be uneven across regions and sectors," the NBU believes.
In its updated forecast, the National Bank raised its estimate for the unemployment rate at the end of this year from 13.9% to 14.2%, and from 11.4% to 11.6% at the end of next year.
According to a survey by Advanter referenced in the report, in August 2024, enterprises were staffed at 71%, with nearly a quarter (23%) of businesses having less than 50% of their staff filled.
According to a survey of enterprises conducted by the NBU in the third quarter of 2024, the balance of responses regarding changes in the number of employees over the next 12 months remained negative at -10.9%, with 12.3% expecting an increase and 23.2% anticipating a decrease. Reductions in staff numbers are expected across all sectors, most significantly in construction (-20%) and least in retail (-5.2%).