Wages in Canada increase as the job market loosens, with productivity concerns impacting inflation progress
Wages in Canada remain high despite a loosening job market and slowing worker output, as reported by BNN Bloomberg.
The Bank of Canada has cautioned that this could hinder progress on inflation.
In the first quarter, Statistics Canada reported that the average hourly wage for vacant positions was $27.25, a 7.3 percent increase from the previous year. This rise partly resulted from a shift towards higher-paying job vacancies.
After adjusting for this change, offered wages increased by 4.7 percent year over year.
This wage growth aligns with other labour force and payroll surveys, showing annual wage increases between 4.5 percent and 5.5 percent. Compensation pressures tend to lag behind a cooling labour market, as wages adjust slowly due to contract lengths and changing labour supply and demand trends.
The Bank of Canada has warned that without productivity gains or increased gross domestic product output per worker, annual wage increases of four to five percent are inconsistent with the two percent inflation target.
The central bank describes Canada's situation as a productivity “emergency,” with labour productivity contracting 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 significant investment in housing over technologies or equipment that could enhance worker productivity is a contributing factor.
Data released Tuesday indicate that the labour market is loosening, which should eventually ease compensation pressures. Job vacancies fell 3.6 percent to 648,600 in the first quarter, the lowest level since the first quarter of 2021.
The job vacancy rate dropped 0.2 percentage points to 3.6 percent, the lowest since the first quarter of 2020, just before the COVID-19 pandemic began.
Since peaking in the second quarter of 2022, shortly after the Bank of Canada began raising interest rates, the number of vacant positions has decreased by 334,980. The unemployment rate has risen, and job gains have lagged behind population growth.
