Wages are not growing as fast as they should given the economic conditions, however
Bank of Canada deputy governor Sylvain Leduc assured that at its current pace, the national economy’s growth will reach the bank’s forecast for the first half of 2018 of around 2% annualized.
“Overall, the data we have received since April support our near-term projection,” Leduc stated last week, as quoted by The Globe and Mail.
“The data has been really encouraging,” Leduc added. “What we’ve seen today, in terms of the [GDP] numbers, are really reassuring for us, reinforcing our views that the economy is evolving as expected.”
Leduc was alluding to the latest figures released by Statistics Canada, which indicated that GDP grew by 1.3% annualized in the first quarter of the year.
However, the deputy governor noted that while the economy is showing signs that it is operating nearly at capacity, “wages are rising somewhat more slowly than we would expect to see” in the current level of economic growth.
“This may indicate that some slack remains [in the labor market],” Leduc said, adding that the proportion of those unemployed for more than half a year “remains significantly higher than it was before the Great Recession.”
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Leduc also hypothesized that workers “may be more reluctant now to ask for bigger raises, even when the economy strengthens” – a decision that might have been informed by unstable employment tenure prospects stemming from the economic shocks of years past.
The BoC’s “wage-common” measure went up 2.6% year-over-year in Q1 2018, which was noticeably lower than the 3% typically observable in a vibrant employment landscape.
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