Canada recorded its strongest wage growth in six years in April, giving the Bank of Canada more evidence that the country’s job market is robust. But don’t expect the central bank to raise interest rates just yet.
The average hourly wage climbed 3.6 per cent to $27.02 over April of last year, according to Statistics Canada’s monthly jobs report released on Friday. That’s the biggest increase since the fall of 2012, when soaring oil prices fuelled a labour shortage and spike in wages in Alberta.
In the country’s two strongest economies – Ontario and B.C. – the average hourly wage expanded by 4.3 per cent and 5.6 per cent, respectively. Alberta’s average hourly earnings climbed 2.6 per cent, Quebec rose 2.7 per cent and Saskatchewan increased 2.7 per cent.
Part of the growth seen in Ontario and Alberta was due to the mandatory hike in the minimum wage. (Ontario’s raised the rate to $14 from $11.60 in January and Alberta increased the rate to $13.60 from $12.20 in October.)
“The fact that it has continued to increase since January is a sign that there is more at play here than the minimum wage hike,” said Josh Nye, economist with Royal Bank of Canada.
Excluding Ontario, Canada’s most populated province, average hourly earnings were up 3.1 per cent.
Twelve of the 16 industries recorded wage inflation above 3 per cent, with higher-paid occupations in finance, real estate and insurance soaring 8 per cent.
“This data reinforces that the labour market is quite strong and probably the Canadian economy doesn’t need the amount of stimulus that is in place right now,” Mr. Nye said.
Wage growth is being closely monitored by the Bank of Canada, as it weighs when to increase the benchmark interest rate.
At its scheduled interest-rate announcement in April, the central bank left the key rate at 1.25 per cent and said it would continue to assess labour data “for signs of remaining slack,” or more people available to work.
Part of the assessment will be looking at a new wage measurement called wage-common, which was recently developed by Bank of Canada staff and is calculated quarterly from job and economic reports.
It has, so far, come in below the monthly jobs report and below 3 per cent – a level the central bank has said was historically consistent with a tight labour market.
The most recent reading of wage common was 2.3 per cent for the fourth quarter of last year.
“It is fair to say that they would view 3 per cent [wage growth] as being a little bit more ‘normal’ and it would probably give them more comfort in raising rates,” said Douglas Porter, chief economist with Bank of Montreal. “But it’s just one thing that goes into the mix.”
The central bank raised rates three times over the past year with wage growth well below 3 per cent. The next scheduled rate announcement is May 30.
Over all, the labour market has been strong for the past year and a half, even with the net loss of 1,100 part time jobs in April. The economy created 28,800 full-time positions and eliminated 30,000 part-time positions. Over the year, employers have added 278,300 new jobs.
The unemployment rate remained at 5.8 per cent, a level first touched in December. Before that, the last time the rate was that low was in October, 2007.