Bank of Canada Sees 3% as Potential Wage Growth for Economy

(Bloomberg) -- The Bank of Canada released details of how it’s assessing developments in the labor market, saying wage growth remains below levels that would be consistent with no slack.

The central bank’s latest quarterly economic forecast highlighted stronger corporate hiring plans, while noting that policy makers remain vigilant for “signs of remaining slack.”

Here are some of the bank’s views on the labor market, published Wednesday in Ottawa along with its decision to hold the policy interest rate at 1.25 percent:

  • Current estimates of underlying wage growth are at 2.7 percent
  • That’s up from 2.3 percent in the fourth quarter 2017 and 1.1 percent in mid-2016
  • Rate of growth of 3 percent “has historically been consistent with an economy in which there is no labor market slack”
  • “Wage growth is somewhat below what would be expected were the economy operating with no excess labor”
  • Income growth has been “strong” even after stripping out higher legislated minimum wages
  • “The labor market continues to improve across sectors and regions”
  • “The Bank will continue to assess labor market data for signs of remaining slack,” such as elevated long-term unemployment and low youth participation
  • Job vacancies have risen and are “considerably higher than the typical annual expansion of employment”
  • Global growth potential is being boosted by higher labor force participation, particularly in the U.S. and Europe, the Bank of Canada said

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