“Purchasing power is deteriorating” | The Press

Employment increases, wages too, but still not enough to keep up with inflation

Helene Baril
The Press

Despite labor scarcity, the labor market continued to create jobs in May, but at the cost of accelerated wage growth.

It is in Quebec that the increase in wages is the fastest. The average hourly wage increased by 6.9% in May on an annual basis, a rate higher than inflation last month (6.8%).

For several months already, wage growth in Quebec has been higher than that of Canada, underlines Simon Savard, economist of the Institut du Québec. “But wages are not keeping up with inflation and purchasing power is deteriorating,” he says. It’s just that purchasing power is deteriorating less quickly in Quebec. »

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

5,000 more jobs in Quebec

The month of May ended with 5,100 more jobs in Quebec. These are mostly full-time jobs, especially in wholesale and retail trade. The unemployment rate climbed from its record low of 3.9% to 4.2% as more and more people returned to the job market. There are still nearly 200,000 unemployed people in Quebec.

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

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

It could start to pick up in the medium term because economic growth is expected to slow and reduce the pressure on the job market. “With rising interest rates, the construction and real estate sectors are expected to slow down, which will have an impact on employment,” she predicts.

New record in Canada

For the third consecutive month, the unemployment rate in Canada set a new record in May, at 5.1%. Net job creation was 40,000, a number higher than expected by market watchers.

Taking into account people who are unemployed but not looking for one, the unemployment rate in Canada reaches 7%, its lowest rate since statistics have been available.

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

The Bank of Canada under pressure

Given the scarcity of labour, upward pressure on wages will continue, estimate National Bank economists Kyle Dahms and Alexandra Ducharme. They point out that the unemployment-to-vacancy ratio is at a historic low, at 1.2, and that companies will have to adapt.

“The management of the wage bill will become crucial, which could mean a limitation of hiring in the months to come”, they estimate.

For the Bank of Canada, which has already raised its key rate three times since the start of the year, the job picture for May is an incentive to continue its efforts to try to defuse inflation.

We should therefore expect another increase in the key interest rate, probably by 50 basis points, when the central bank announces it on July 13.