Tight Labor Market Is Fattening Canadian Workers’ Wallets Again

(Bloomberg) -- Canadians are starting to see a pickup in their wages, a positive sign for the domestic economy amid growing global uncertainty.

Average weekly earnings for Canadian workers rose 3.4% in May from a year earlier to C$1,031 ($784), the fastest pace of growth since February 2018, Statistics Canada said Thursday in Ottawa. The Survey of Employment, Payrolls and Hours also showed firms added 32,600 jobs on the month, the most since January.

The broader recovery in earnings growth is one of the last pieces to fall into place for a labor market that’s seen decade-low unemployment rates and some of the fastest job gains on record. Statistics Canada’s more timely Labor Force Survey showed hourly wages growing 3.6% in June, also the fastest pace in more than a year. After accounting for inflation, real wage increases are now 1% or more by both survey measures.

The boost bodes well for the domestic economy, where higher interest rates, rising debt-servicing costs and a slowing housing market damped consumption for most of 2018. Rising earnings, coupled with a recovery in house prices, should fortify household spending at a time when uncertainty and rising global trade tensions are poised to threaten Canada’s exports and business investment.

“Measures of wage growth in Canada are now more consistent with what we would expect from an economy basically at full employment,” said Dominique Lapointe at Laurentian Bank Securities in Montreal. “If the current strength continues it should support household consumption moving forward.”

Some of the improvement is being driven by a recovery in Canada’s energy sector, which pays more than most other industries. Workers in the mining, quarrying and oil and gas extraction businesses earned an average C$2,298 a week in May, 13.5% more than a year earlier. That’s the fastest growth for the sector since August 2014, just before a collapse in global oil prices flattened wage growth for nearly half a decade. Earnings in the finance and insurance sector rose 7.2% on the year, the most since last June.

On an unadjusted basis, average earnings rose 3.7% in May from a year earlier, the fastest growth in almost seven years.

To contact the reporter on this story: Erik Hertzberg in Ottawa at eschmitzhert@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier, Stephen Wicary

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