Source: The Canadian Press

Canadians have been bringing home more money each week than they did during the economic downturn, when jobs and workers’ hours were slashed, but economists warn a return to recession in the U.S. could derail rising incomes.

“My concern is that if we get a double dip (recession) in the U.S., we’re certainly going to feel that in Canada, so I think we’re in for an extended period where unemployment remains — at best — at or near 8%,” says Andrew Jackson, chief economist at the Canadian Labour Congress.

“And you will not see significant wage growth with unemployment at that level.”

Statistics Canada reported Thursday that the average weekly earnings of non-farm payroll employees rose by 4% in June from a year earlier to $853.50.

That’s the largest year-over-year increase since February 2008 and the seventh straight month in which the year-over-year increase was at or above 2.3%.

But much of the weekly earnings increases can be attributed to employees on hourly wages working more hours as employers boost output, Jackson said.

Total hours worked by hourly and salaried employees increased by 0.1% in June, the fifth advance in six months. Average weekly hours worked by hourly and salaried employees amounted 32.9 hours in June, unchanged from May.

During the recovery, wages have increased by about 2% — just in line with the pace of inflation, Jackson said.

“The downward pressure of very high unemployment puts workers in a very weak bargaining position and I don’t see any reason for that to change, “ he added.

During the recession, employers cut spending on wages and salaries by $9.5 billion resulting in the loss of some 400,000 jobs.

But nearly all of those lost jobs have been made up in a spate of hiring in recent months.

Weekly earnings will grow by 3.4% this year and 4.2% in 2011, according to predictions in a report from the Desjardins Group released Thursday.

That’s because the employment outlook is improving steadily as the domestic economy remains strong, says Benoit P. Durocher, senior economist at Desjardins.

Desjardins expects employment growth of 1.8% this year before improving to 2.2% in 2011. As a result, the unemployment rate will drop from 8% to about 7.4%, it predicts.

“We think there will be some pressure on the high side from inflation and this will favour some increase in the wages,” he said.

“This should be a good sign for the internal economy combined also with job creation expected for next year.”

However, those projections assume that the United States, which has been churning out dismal economic data, will be able to avoid a double dip recession, which would slow job creation in Canada, Durocher said.

Employers surveyed in May and June said they were cautiously optimistic about economic recovery continuing next year, according to a survey conducted by Towers Watson, a company that monitors employment data.

Almost all of the respondents, or 98%, said they expected to increase salaries next year. But that was before disappointing July employment figures showed the economy lost 9,300 jobs that month.

Base salaries were expected to be up an average of 3.1% for executives, 3% for managers, 2.9% for professional or technical staff, 3% for administrative and support groups and 3% for hourly workers.

But employers’ optimism may be at odds with the economic realities Canadians will face next year, as governments enter an era of fiscal restraint, Jackson said.

“Given the major loss of full-time jobs that we saw last month and very, very clear signs the U.S. economy is very weak and slowing down, I’d be very surprise if we saw a significant increase in wages in the period ahead.”

In the public sector, wages in recent months have been rising below the pace of inflation, and public sector wage freezes have been implemented in British Columbia, Manitoba and New Brunswick and are being considered in Ontario.

Government restraint policies and the end of stimulus spending in March will drag any wage and salary growth, Jackson said.

“A lot of the measures that were put in place to support jobs in the economy are set to run out very soon, and at a minimum that needs to be reconsidered, whether the economy is strong enough to stand on its own two feet,” he said.

IE