Canadian wages rise despite a cooling job market and productivity concerns, says Statistics Canada
Wages in Canada have not yet cooled, even as the job market loosens and output per worker slows.
The Bank of Canada has warned that this scenario may hinder progress on inflation, as reported by BNN Bloomberg.
Statistics Canada reported that the average hourly wage for vacant positions was $27.25 in the first quarter, reflecting a 7.3 percent increase from the previous year. This rise is partly due to a shift towards higher-paying job offers.
After adjusting for this shift, Statistics Canada estimated that offered wages increased by 4.7 percent year over year. This matches other measures from labour force and payroll surveys, which show wage growth at a yearly pace between 4.5 percent and 5.5 percent.
Wages typically adjust slowly to rising prices due to the length of contracts and the changing trends in labour supply and demand.
The Bank of Canada has stated that without gains in productivity or increased GDP output per worker, annual wage increases of four to five percent are inconsistent with achieving the two percent inflation target.
The central bank has described Canada as being in a productivity “emergency,” noting that labour productivity has contracted in six of the past seven quarters, including a 0.3 percent decline in the first quarter of this year.
Some theories suggest that Canada’s heavy investment in housing, at the expense of technology and equipment to improve worker productivity, may contribute to this crisis.
Despite these wage pressures, recent data confirm that the labour market is loosening, which should eventually ease compensation pressures. Job vacancies fell by 3.6 percent to 648,600 in the first three months of the year, the lowest level since the first quarter of 2021.
The job vacancy rate, which measures vacant positions relative to total labour demand, decreased by 0.2 percentage points to 3.6 percent, the lowest level since the first quarter of 2020.
Since peaking in the second quarter of 2022, following the Bank of Canada’s aggressive interest rate hikes, the number of vacant positions has fallen by 334,980. Additionally, the unemployment rate has risen, and job gains have lagged behind population growth.
