Canada’s economy is growing but slowing down. In April, the unemployment rate was 6.1%, the highest since the end of the pandemic. Usually, when the job market slows, wages also stop growing quickly. However, wages have not slowed down much. This might be because of big changes in the economy. So, will businesses get a break on wages this year?
Fewer Job Shortages
Even though the economy is slowing, there are still many jobs being created. Since the beginning of 2024, about 41,500 new jobs have been added each month. This is more than the 35,000 new jobs each month in 2023. However, the job market is easing up because there are more people looking for work and fewer new jobs needed.
The baby-boom generation is slowly retiring. This will keep affecting the job market until 2031. More older workers are staying in their jobs longer than expected. Companies are also hiring newcomers to fill positions. Without new immigrants, Canada’s workforce would not be growing much this decade. Immigration is expected to rise significantly between 2022 and 2025.
With the economy slowing, there are more layoffs, but not at alarming levels. This means there are more people available for work than new jobs being created. Job openings started to drop in the second half of 2023. Employers now have more options for finding workers and filling positions.
Smaller Salary Increases?
In April, the average hourly wage in Canada went up by 4.7% compared to last year. It takes time for wages to return to normal after inflation. This process has been slower than many hoped. Even though companies expect salaries to grow more slowly than in the past two years, many still think wages will remain high. More companies are expecting higher wages to continue until 2025.
A recent Bank of Canada report showed that private sector workers expect higher wages more than public sector workers. However, wage expectations are rising faster among public sector workers.
Canada is also reducing the number of temporary workers. Stricter rules for temporary workers will affect businesses that have depended on these workers. As fewer low-wage workers are available, businesses might face more wage pressure again.
Will Wages Keep Up with Inflation?
For now, wage growth is still above average and might reach 3.5% in 2024. Most companies have to consider the high cost of living when setting wages. Although inflation is slowing, high interest rates still affect household budgets. Many people will have less money to spend, even if prices are not rising as quickly.
Wage growth will slow down a bit, but with high inflation and interest rates, businesses will face higher labor costs. This is already seen in recent minimum wage increases across Canada.
