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Wages follow inflation in Quebec

A sign of rising prices, but also of a tight job market, wages are keeping up with inflation in Quebec.

The average hourly wage of Quebec employees increased by 8.1% over 12 months in July, revealed Statistics Canada on Friday when unveiling the results of its Labor Force Survey carried out from July 10 to 16.

This was once again much higher than in Ontario (4.9%) and the Canadian average (5.2%). It was also slightly higher than the last measure of consumer price index (CPI) growth, which came in at 8% in Quebec in June (8.1% in Canada).

Like inflation, this wage increase has accelerated in recent months in Quebec. Still only at 3.1% in January (against inflation of 5.1%), it was 5.7% in April (against inflation of 6.8%), then 6.9% in May ( against inflation of 7.5%) and 7.5% in June.

This rapid wage growth reflects rising prices, but also an “extremely tight” labor market, observed Desjardins Group economist Hélène Bégin in a brief analysis. “The sharp acceleration in inflation and the high expectations for the coming months combine with the shortage of labor to explain the surge in wages. »

Second decline in employment

However, the labor market in Canada is showing signs of slowing down, Statistics Canada also reported. Last month was marked by a small decline of 31,000 jobs, but this followed another decline in June, for a total loss of 74,000 jobs compared to May. However, all of this remains very modest compared to the gain of more than one million jobs over the previous 12 months.

The unemployment rate in Canada has also remained at its historic low of 4.9%. In Quebec, it even fell slightly, from 4.3% to 4.1%, but due to a slight drop in the number of job seekers (-0.2 percentage point) rather than the creation new jobs (-4500).

The unemployment rate in Québec thus remains very close to its record low of 3.9%, reached in April.

In Canada, employment fell mainly in the public sector (-51,000 jobs) in Quebec and Ontario, particularly in health and social assistance (-22,000) and in educational services (-18,000). However, these job losses were partly offset by the increase in the number of self-employed workers (+34,000) and still leave the public sector with 215,000 more jobs than 12 months ago.

In the case of the health and social assistance sector alone, we find ourselves with as many jobs as a year ago, when there were still more than 140,000 vacant positions in May. Statistics Canada reports that one in five nurses worked overtime last month, an all-time high since comparable data became available in 1997.

The favorable labor market conditions also benefit students looking for summer employment. Their unemployment rate in July (11%) had not been this low since 1989.

Surprise in the United States

If analysts were a little disappointed by the lack of energy in the Canadian labor market, it was quite the opposite in the United States, where job creation was twice as strong as expected in July, with a total of 528,000 jobs, the US Department of Labor reported on Friday.

The country has now regained all the jobs lost during the pandemic (22 million), which Canada had already done for 10 months. The unemployment rate has now fallen back to its February 2020 level, i.e. 3.5%. As inflation and the race for workers are so fierce in the United States, the average hourly wage in the private sector now shows a 5.2% increase over 12 months.

Hardly criticized for his management of the economy in this year of midterm elections, the American president, Joe Biden, did not fail to underline the good news. “More people are working than at any time in American history,” he said, seeing it as “the result of [son] economic plan”.

Pay attention to interest rates

This good job performance, the growing difficulty for companies to find labor and the acceleration of wage increases are all factors that will reinforce the Bank of Canada and the American Federal Reserve in their feeling that their Economies are not only able to take further interest rate hikes, but need them to bring inflation in line, analysts observed.

Faced with inflation moving further and further away from their long-term targets of 2%, the two central banks have begun an accelerated hike in their interest rates since March in order to cool the ardor of consumers and businesses. , but not without raising the fear that they will thus cause a recession.

Lowered to their absolute floor in response to the COVID-19 pandemic, their key rates have now returned to around 2.5%.

“For the Bank of Canada, the conclusion will be that, despite the obvious slowdown in growth, conditions remain very tight and wages are on the upswing,” said the Bank of Montreal’s chief economist in a brief analysis. , Douglas Porter. “We expect, in this context, another increase in its key rate at its next meeting in September, but less vigorous than its mega-hike of 100 basis points last month. It should rather be 50 points. »

“The US economy is clearly far from being in recession,” noted his colleague from Desjardins Group, Benoit P. Durocher. “Under these conditions, it is to be expected that the Federal Reserve will continue its fight against high inflation with further increases in its key interest rates in the months to come. »

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