The Loonie Hour #81
On this week's podcast, we discuss the housing affordability, wage growth or lack thereof, and the US GDP release.
There are several methodologies for calculating wage growth for an economy. To be clear, it is an inexact science, and each measure is flawed in its own way. For example, the obvious sampling issues which arose during acute periods of draconian and ineffectual government lockdowns in reaction to the pandemic. But each method can and does provide insight into labour markets and, on a slow news week, they are surely worth sharing.
In Canada, wage growth continues to disappoint, falling to 1.85% year-on-year (YoY). Manufacturing wage growth has fared better over the cycle but is now slowing faster and is now at 3.0%, down from a peak of nearly 8.0%. For workers in the Services industries, the sector which accounts for most of the employment in Canada, wage growth is down to 2.0%. Not good.
The chart above is nominal wage growth which measures the change in wages over time without considering changes in price level (i.e., inflation). Ignoring inflation can be a mistake if inflation outpaces nominal wage growth. In that scenario, wage earners are actually getting poorer over the period, and that is to say, they are losing purchasing power. Unfortunately, that’s exactly what’s happening in Canada, where wage growth, when adjusted for core inflation, the less volatile of the two main inflation measures, is at a 30-year low and trending lower. Again, not good.
It is also useful to compare wage growth across different jurisdictions. Comparing wage growth data across countries can provide important insights into the state of an economy and the standard of living of workers in different countries. Here again, not good. Nominal wage growth in the US has significantly outpaced wage growth in Canada.
Click below to listen to this week’s episode!
Informative, thank you!