Wage growth hit its highest level in almost six years in April as the economy posted a net loss of 1,100 jobs and an unemployment rate that held steady at 5.8%.
Statistics Canada’s (StatsCan) released a new jobs report Friday that showed average hourly wages in April were 3.6% compared higher with a year earlier. It was the monthly reading’s largest annual increase since October 2012.
The indicator, which is closely monitored by the Bank of Canada (BoC) ahead of its interest-rate decisions, has been creeping upwards. It registered a year-over-year increase of 3.3% in March and 3.1% the month before.
The strengthening numbers for wage growth points to a tightening labour market, which could push inflation higher and nudge the central bank closer to raising its trend-setting interest rate.
With the economy running close to capacity, the central bank is on an interest rate-hiking trajectory. The question, however, is around the timing of the next increase.
The bank’s next policy decision is scheduled for May 30, although many analysts predict governor Stephen Poloz will wait until the bank’s July meeting before raising the rate. Another rate increase would be Poloz’s fourth since last July.
Royal Bank of Canada senior economist Nathan Janzen said Friday that employment data has been good for a while, so there hasn’t been much space for the labour market to see further progress. One area, however, that still has room for improvement is wage growth, he said.
“On the wage side, I think there’s less and less reason to think that there’s much slack left in labour markets,” Janzen said.
He noted the wage growth numbers received a boost from Ontario’s minimum wage increase in January. But he added that even when the province is excluded from the calculation, wage growth still rose to 3.1% last month, up from 2.9% over the first three months of 2018.
Aubrey Basdeo, head of fixed-income with BlackRock Asset Management Canada Ltd., said while the wage numbers are a “healthy sign” he doesn’t think Friday’s report will change anything for the BoC as it mulls its next rate increase.
Last month, the BoC said that despite recent improvements in wage growth, the indicator remained below what would be expected if the economy no longer had slack in its labour force.
Looking at the headline numbers in Friday’s StatsCan report, the overall decline in jobs last month was so small the federal agency did not consider it statistically significant.
The unemployment rate stayed at its record low of 5.8% for a third-straight month. It matched the reading’s lowest mark since the agency started measuring the indicator in 1976.
The participation rate, however, edged down in April to 65.4%, from 65.5% in March, as fewer people looked for work.
The agency said the economy produced 28,800 full-time jobs last month and shed 30,000 part-time positions. The country also saw a decrease of 13,600 positions in the public sector, while the number of private-sector jobs rose by 28,000.
Goods-producing industries shed 15,900 positions, mostly in construction. Services sectors, meanwhile, created 14,800 jobs following big increases in professional, scientific and technical services, as well as in accommodation and food services.
The youth unemployment rate — for people aged 15 to 24 — increased in April to 11.1% following a net gain of 17,700 new jobs. The labour force participation rate for young people slipped to 63.4% from 63.8%.
Compared with 12 months earlier, the employment was up 1.5% following the creation of 278,300 jobs, which was fuelled by 378,300 new full-time positions.