The government is ideally placed to address ongoing labour market tensions, RBC analysts say
Policy makers have even more compelling reasons to manage Canadian inflation levels now, as taming economic volatility is crucial to mitigating the impact of work stoppages, according to RBC Economics.
“High inflation is driving more workers to take labour action to press for wage increases,” wrote Robert Hogue and Rachel Battaglia. “Unfilled workdays due to labour stoppages rose 49% last year compared to the 10-year average that led up to the pandemic.”
Additionally, wages in recently negotiated contracts have, on average, seen their greatest first-year percentage increases since the early 1990s.
“These jumps could push other workers and their representatives to be more aggressive in their demands, leading to further stoppages,” Hogue and Battaglia said.
A weaker economy means that “the ability of employers to acquiesce to firmer demands will diminish,” the duo stressed. “And passing on higher operating costs (including wages) to customers will get harder. These conflicting goals between negotiating parties risk more impasses and labour disputes in the year ahead.”
These only further underscore the role of government policy in addressing these tensions, Hogue and Battaglia said.
“More turmoil in labour relations raises the risk of keeping the Canadian economy in extended ‘transitory’ turbulence. As more labour contracts expire this year, taming inflation and bringing balance back to the country’s labour market will be key to restoring peace to labour relations in Canada,” it was stated.
Canada's national economy showed minimal growth of just 0.1% in August, indicating a sluggish performance.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 29, 2023
Read more: https://t.co/Y8cp5OwsiL#mortgageindustry #sluggishmarket #economy #interestrates #ratehike #economy
Job vacancies have been trending downward for more than a year
Updated figures from Statistics Canada showed that national job vacancies fell by 43,100 (down by 5.8%) to 701,300 in July – the latest in a steady downturn that began back in June 2022.
Year over year, job vacancies fell by 273,700 (down by 28.1%) nationwide. The July vacancies were also the lowest since May 2021 (673,400), StatCan said.
“The job vacancy rate – which corresponds to the number of vacant positions as a proportion of total labour demand (the sum of filled and unfilled positions) – decreased by 0.3 percentage points to 3.9% in July, a rate not seen since February 2021,” StatCan reported.
Robert Kavcic, senior economist and director of economics at BMO Capital Markets, said that the numbers give the central bank impetus to keep its interest rate frozen at 5%.
“It’s still premature for this to feed into wages and, therefore, inflation, so the Bank of Canada will remain on high alert,” Kavcic said.
“But it does suggest that the bank might be able to keep leaning on the economy and inflation with rates at current levels.”
