Canada is facing economic challenges similar to its southern neighbour’s: tight labour market conditions and decades-high inflation. The Bank of Canada, just like the Federal Reserve, is aggressively raising interest rates in hopes of cooling off an overheated economy.
Canada’s prime-age unemployment rate increased in August to 4.60%. It was the first time in months that the rate has notably risen. This increase is the first since May 2020 that has not been driven by heightened public health restrictions.
The prime-age labour force (aged 25-54) rose by 45,100 in August, following a lull in July. Meanwhile, employment decreased by 25,700 from the month before for the same age group. Canada’s labour force participation rate in August was well above February 2020’s (88.1% and 87.3%, respectively).
The Canadian workforce has steadily recovered and gone beyond pre-COVID levels, but a new set of economic concerns plague Canada.
Wages continued to climb across the board for Canadians: earnings were up 5.4% from the year before in August. After stabilizing in June and July at 5.2%, this slight increase may reignite fears at the Bank of Canada that inflation could accelerate further.
Average hourly earnings are rising quickly for transportation and warehousing, up to $31.05 in August. Workers in retail trade and food services are seeing their nominal wage gains level out after a long stretch of gains.
Canadian job-seekers are expecting higher salaries to keep up with inflation. Recruiters should be aware of the quickly shifting average wages in their industry in order to stay competitive.
Just like much of the Western world, Canada is facing decades-high inflation: prices are up 7.6% in July from the year before. Like their United States counterparts, officials at the Bank of Canada have been aggressively rising rates to curb the price increases. Just last week, the Bank raised rates by 75 basis points to 3.25%, the first time since mid-2008 that rates have inched above 3.00%.
The Bank of Canada is willing to do whatever it takes to curb high inflation; more rate increases are expected in the months to come, and the recent release that announced the latest omitted previous language of a “soft landing.” As monetary policy continues to tighten, August’s unemployment rate rise may be the first of many.