CANADA
- Yesterday’s last-minute deal between Air Canada and the ALPA union averted a strike by more than 5,000 pilots that would have grounded more than 1,000 daily flights but it also again raises the risks of Canadian wage growth proving stickier than expected.
- Bloomberg reports a source saying the deal involved 4% annual increase over three years plus an upfront 26% boost as well as other benefits. The 42% compensation increase over four years is expected to cost C$1.9bn.
- More generally, major settlements have been covering fewer employees recently, an average 32k per month over the twelve months to May. However, with agreements averaging 41 months, the effects can still be long-lasting.
- The Bank of Canada has drawn confidence from measures such as its wage common metric running at much softer growth rates than the average hourly data from the labour force survey for example (3% Y/Y vs in excess of 5% Y/Y). The recent cooling in wage settlements has probably also helped with average settlements of circa 3% annually vs 4-5% figures in 2023 – see chart.
- However, the public nature of the talks, especially following CN and CPKC rail strikes, raises the risk of boosting wage growth expectations beyond those typically involved in wage settlements.
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