Canada announces a huge increase in minimum wage average hourly

zahraa ahmed - | World News

Statistics Canada today announced a report indicating a huge rise in average wages, to nearly $35.

Multiple times the number of expected jobs

According to data announced by Statistics Canada, the Canadian economy added 5 times the number of jobs expected for April, as the unemployment rate unexpectedly stabilized at 6.1%.

This indicates a reduction in the market's bets on an interest rate cut in June, as data issued by Statistics Canada also showed that the gains are the largest since the addition of 110,000 jobs in January 2023.

At the time, it was a combination of part-time and full-time employment, all in service-producing industries in Canada.

Reducing interest rates from their current highs

It is worth noting that many analysts have confirmed that this data may prompt the Bank of Canada (BoC) to think twice about when to start lowering interest rates from their current 23-year high of 5%.

It is also noteworthy that financial markets in Canada have reduced their bets on lowering interest rates in June to 48% from 54%.

Canada's financial markets are currently pricing in the full reduction in September compared to July before the report was released.

Increases the barrier to lowering interest rates

For his part, the chief Canadian strategist at TD Securities, Mr. Andrew Kelvin, confirmed that this increases the barrier to lowering interest rates in the very near term, adding that he believes it speaks to how the balance of risks actually supports the Bank of Canada potentially waiting until July.

It is also worth noting that the Canadian dollar increased by 0.3 percent to $1.3640 per US dollar, or 73.31 US cents.

Notably, average hourly wage growth for permanent employees slowed to an annual rate of 4.8% from 5% in March.

The rate of wage growth - which the Bank of Canada tracks closely because of its impact on inflation - is now the slowest since falling to 3.9% in June.

Wage slowdown in Canada

It is worth noting that the slowdown in wages adds to the signs that the economy is moving in line with the Bank of Canada’s expectations.

BMO Capital Markets Chief Economist Doug Porter added that the jump in employment was not a complete surprise, given Canada's healthy population growth.

He added that it is not quite the clear story for the Bank of Canada that the headline jobs number might suggest.

It is also certain that it will give the bank a temporary pause if it is inclined to cut, stressing that it still believes that the real indicator with heavy weight here is the next inflation reading (on May 21), he said by phone.

It is worth noting that the Bank of Canada looks at a wide range of indicators for evidence that inflation is heading towards the 2% target.

Interest rate cut in June

The Bank of Canada confirmed last month that a June interest rate cut was possible if the recent slowing trend in prices continued.

Deputy Chief Economist for North America at Capital Economics, Mr. Stephen Brown, confirmed that the strong numbers gave the Bank of Canada time to see whether inflation will continue to decline.

Waiting for the late July meeting to cut interest rates

He added in a note that this makes it likely that the bank will wait until the late July meeting to cut interest rates, given that there are three (inflation) reports before that meeting but only one report before the early June meeting.

Professional, scientific, and technical services, together with lodging and food services, led the net 100,700 job increase in the service sector reported on Friday. 10,400 jobs were lost net in the products sector, the most of them in agriculture and construction.

After six months of falls, StatCan reported that the employment rate, or percentage of the population working, remained constant in April at 61.4%.

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zahraa ahmed
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