MNI DATA IMPACT: Canada 3.4% Wage Gain is Fastest in a Year

By Greg Quinn

     OTTAWA (MNI) - Canadian wages grew the fastest in more than a year in May,

moving outside the central bank's inflation target band and evidence that

domestic spending will carry the economy as foreign trade weakens.

     Average weekly earnings climbed 3.4% in May from a year earlier, the most

since a 3.5% gain in February 2018, Statistics Canada reported Thursday from

Ottawa. Wage gains have almost tripled from a low of 1.2% in February,

suggesting consumers are gaining more spending power.

     Pay increases were lagging a job market where a hiring binge took the

unemployment rate to record lows. The Bank of Canada is likely to hold its key

interest rate at 1.75% this year after five previous increases because gains in

domestic spending could be canceled out by a global trade war.

     The central bank projects inflation will stick reliably around its 2%

target by the middle of next year as the economy regains momentum following

setbacks in the energy industry. The BOC's target for overall inflation is 2%,

with a range between 1% and 3%.

     In the near term inflation is expected to slow because of a drop in

gasoline prices, and it would probably take a sustained period of major wage

hikes to turn that around. Still, faster wage gains support the idea the BOC can

resist the pressure for more stimulus being seen in the U.S., Europe and Japan. 

     Statistics Canada's payroll report also showed wages rose across all 10

major industries in May from a year earlier, including a 7.5% gain for

administrative and support workers. On a monthly basis, weekly average hours

worked were unchanged at 32.7 from April, and the number of non-farm employees

climbed by 32,600.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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