“Purchasing power is deteriorating” | The press

Employment is rising, as are wages, but still not enough to keep up with inflation

Posted at 5:00 am

Helen Barill

Helen Barill
The press

Despite labor shortages, the labor market continued to create jobs in May, albeit at the expense of accelerated wage growth.

Wages are rising fastest in Quebec. The average hourly wage rose 6.9% on an annualized basis in May, a rate that was higher than inflation last month (6.8%).

Wage growth in Quebec has been higher than in Canada for several months, says Simon Savard, economist at the Québec Institute. “But wages are not keeping pace with inflation and purchasing power is deteriorating,” he says. It’s just that Quebec’s purchasing power is deteriorating less rapidly. »

According to Statistics Canada, hourly wage growth in Ontario is estimated at 3.3%; the Canadian average is 3.9%.

5,000 more jobs in Quebec

The month of May ended with 5,100 more jobs in Quebec. Most of these are full-time jobs, especially in wholesale and retail. The unemployment rate rose to 4.2% from a record low of 3.9% as more people returned to the labor market. There are still nearly 200,000 unemployed in Quebec.

In the greater Montreal area, the unemployment rate remained unchanged at 4.8%.

The large fluctuations in the labor market are a thing of the past, says Joëlle Noreau, economist at Desjardins. “The unemployment rate can still fall a little, but it will be difficult because of the labor shortage,” she explains.

It could pick up again in the medium term as economic growth is expected to slow and ease pressure on the labor market. “As interest rates rise, the construction and real estate sectors are expected to slow down, which will impact employment,” she predicts.

New record in Canada

For the third month in a row, the unemployment rate in Canada hit a new record at 5.1% in May. Net job creation was 40,000, a figure higher than market watchers had expected.

If you include unemployed people who are not looking, the unemployment rate in Canada is 7%, the lowest level since statistics have been kept.

Alberta led job creation in May with 28,000 additional jobs. In Alberta, whose economy is being fueled by high oil prices, the unemployment rate fell 0.6 points to 5.3%.

The Bank of Canada under pressure

National Bank economists Kyle Dahms and Alexandra Ducharme predict that upward pressure on wages will continue given the labor shortage. They point out that the unemployment-to-vacancies ratio is at an all-time low of 1.2 and businesses need to adjust.

“Management of wage costs will become crucial, which could mean a hiring restraint in the coming months,” they estimate.

For the Bank of Canada, which has raised interest rates three times since the start of the year, the May job picture is a spur to continue its efforts to defuse inflation.

We should therefore expect another interest rate hike of probably 50 basis points when the central bank announces it on July 13th.

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  • $31.12
    The average hourly wage in Canada rose 3.9% in May from a year earlier


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