Wage growth in Canada has been flying high this year, to the point where it has actually outpaced inflation. But new data from Indeed suggests it could be coming down to Earth.
Driving the news: Advertised pay rates for new openings have been steadily decelerating, per Indeed, settling in at a 4% year-over-year increase in May, down from a peak of 5.3% last August. Deceleration was mainly driven by slowing wage growth for higher-paying jobs.
- The tech sector, which is famous for throwing money at new hires, was a big culprit, posting fewer ads with stagnant salaries amidst cost-cutting and layoffs.
Why it matters: The Bank of Canada has tabbed hot wage growth as a big factor in sticky inflation. Steady deceleration creates a clearer path to reaching the target 2% inflation rate.
- The data could be an early sign that wage pressures are easing, Indeed senior economist Brendon Bernard told The Globe and Mail, as pay rates employers advertise serve as a starting point for actual rates and “generally affect broader earnings trends.”
Yes, but: Wage growth is still high compared to pre-pandemic times, and a surge in unionized workers securing higher pay could lead to inflated wage growth numbers.
Plus: If wage growth does drop off, but inflation sticks around, that’s bad news for the average Canadian worker trying to keep up with still-elevated prices.—QH