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Canada’s Job Engine Running at Full Throttle, But Wage Growth Still Missing

July 07, 2017

The Conference Board of Canada’s Chief Economist Craig Alexander offers the following perspectives/insights:

Quote

“Canada delivered yet another month of strong job creation, adding to the picture of an economy expanding at a robust pace. The great mystery is the lack of wage growth. This creates a challenge for the Bank of Canada, as inflation is below target and wage pressures are not evident. Nevertheless, if the Bank has conviction in the health of the Canadian economy, they are likely to hike next week,”
—Craig Alexander, Senior Vice-President and Chief Economist, The Conference Board of Canada.

Insights

  • Canada’s job creation in the first half of 2017 has been remarkably strong, including the latest increase in June. The labour market momentum aligns with other indicators suggesting that the Canadian economy grew by close to 3 per cent in the second quarter. The recent data are reinforcing market expectations for a hike from the Bank of Canada on July 12. 
  • The one element that is missing from Canada’s robust performance is wage growth. Average hourly earnings for permanent employees was unchanged in June at a year-over-year pace of 1.0 per cent—which is below the rate of inflation. If the Bank of Canada did not want to hike next week, it could point to below target inflation and low wage growth. However, the Bank sets policy based on expected economic and inflation conditions in 12 to 18 months time, because that is the lag time between rate hikes and their impact on the economy. Accordingly, the Bank of Canada may not be deterred by the current soft wage growth.
  • The Canadian economy generated 45,300 net new positions in June. The gains were dominated by the addition of 37,100 part-time jobs. However, this follows strong full-time employment growth in prior months, and 8,100 full-time positions were still added last month. Despite an increase in the labour force, the unemployment rate fell by one-tenth of a percentage point to 6.5 per cent.
  • From a sector perspective, the employment growth was broadly based. Services industries created an additional 29,200 positions, with the strongest hiring coming from professional and technical services, and health care. Goods-producing industries added 16,000 jobs, with agriculture recruiting the most (12,000).
  • Regionally, Quebec and B.C. lead the way, with net new hiring of 28,000 and 20,000 respectively.

 


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Photo of Craig Alexander Craig Alexander
Senior Vice-President and Chief Economist

Craig Alexander brings over 19 years of experience in the private sector as an economic and financial forecaster to the position of Senior Vice President and Chief Economist. He oversees the Board’s macro-economic outlook products, custom economic and tourism research.

Follow Craig on Twitter

@CraigA_Eco


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