The unemployment rate is currently too low in Canada and affecting many areas of the employment sector, an economist told automotive professionals recently.
Thomas Feltmate, senior economist at TD Bank told attendees of the Canadian Black Book Talk Auto 2023 conference that the country needs to see an increase in the unemployment rate here before wages can come down. The unemployment rate in December was unchanged at 5.8 per cent from the previous month after rising a tenth of a percentage point, reported Statistics Canada.
With employers unable to find workers, wage demands for those who are working will continue to increase. Right now, wages have been increasing upwards of 5 per cent year-over-year.
Higher inflation is playing a role as well, Feltmate added.
“It’s kind of sticky at this point. It’s staying elevated,” he said, noting that in a normal environment where inflation is at 2 per cent, we would expect to see wage growth closer to the 3 per cent mark.
“So again, this is kind of working against what the Bank of Canada is ultimately trying to do,” Feltmate said.
He believes policymakers in Canada should be worried. Unions are playing catch up on wages as several — from auto workers to grocery store employees — have hit the picket lines for higher wages. The private sector has seen wages increase significantly over the last few years.
“Now as more unions, labour contracts are coming up for negotiation, we’re seeing them push much harder in terms of what the unions want to get in terms of wage growth,” Feltmate said. “And that’s significant for Canada because unionization accounts for about 30 per cent of the labour force here. So that’s keeping some of that stickiness on wage growth right now.”