Canada’s labour market is showing signs of slowing. Will it help bring inflation down?
Early signs of wage growth slowing are an indicator the Bank of Canada’s fight against inflation is slowly gaining ground, economists said, but it’s too soon to tell whether Canadians will regain the purchasing power they lost amid sustained price growth.
“If wage growth is going to cool, then we better see inflation come down even faster,” said Brendon Bernard, senior economist with job site Indeed.
Otherwise, workers won’t make up that lost ground, he said.
“It’s a bit of a tug of war between the two.”
Wage growth is just one factor the Bank of Canada is eyeing in its ongoing fight against inflation, said BMO economist Shelly Kaushik.
“We are seeing a bit of a slowdown in broader economic activity. We are starting to see demand for labour, demand for some goods and services, starting to step down,” she said.
“That’s all in line with what the bank wants to see, to help cool those inflation pressures.”
On Friday, Statistics Canada said the economy was essentially unchanged in April, neither growing nor shrinking.
Inflation peaked last June at more than eight per cent and has been moderating ever since, coming in at 3.4 per cent in May. The central bank is targeting roughly two per cent for inflation, said Kaushik, and ideally wage growth would more or less match inflation.
Wages grew 5.1 per cent in May, year-over-year, slightly slower than 5.2 per cent in April, the month wage growth surpassed inflation, according to Statistics Canada’s labour force survey.
Meanwhile, Statistics Canada’s latest report on payroll employment found that wage growth got stronger in April, but job vacancies declined.
The payroll report provides data at a small lag compared with the labour force survey, but often comes with more nuance, said
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