Russian labor market remains in standby mode

The muted growth in nominal wages remains the crucial challenge for the Russian labor market, though some positive backward revisions in June have embellished the dramatic contraction of real income. It is hard to find any drivers for nominal wages in June, especially given that the government continues to freeze civil servants' wages. 

Moreover, the authorities have spoken about the need for fiscal consolidation over the next three years, which implies that the political cycle will not be a driver for wages. The labor market seems to be caught in a trap: the slow improvement in the internal economic backdrop is not underpinning a recovery in the factors that could see wages revised up, while the contraction in real wages is holding back economic recovery, assumes Societe Generale. 

According to Societe Generale, "We see real wages printing near -8.5% yoy, anchored by inflation, and we see the rate of unemployment remaining near its cyclical lows at 5.7% in June."