Low-Wage Recovery?

The August employment numbers seem modestly positive, but only in comparison to July’s ruinous numbers. Canada’s labour market weakened severely during the summer of 2008.

The Employment Numbers in Context

The creation of 41,000 private-sector jobs in August replaces fewer than half of the 95,000 private-sector jobs lost in July. The loss of 24,000 public-sector jobs in August wipes out most of the 30,000 public-sector jobs created in July. The 2,000-person decline in self-employment during August offsets some of the 10,000-person rise in July. On balance, net employment gains in August (15,000) replaced less than one-quarter of the net employment losses in July (55,000).

During the summer of 2008 (June, July, August) as a whole, full-time employment fell by 30,000 and part-time employment dropped by 15,000, for an overall employment decline of 45,000.

Wages Soften

A bright spot in the Labour Force Survey had been that wages were rising at an annualized rate of 4.0% or more. This news was particularly welcome after the most recent Census revealed that employment earnings had barely kept pace with inflation over the past 25 years.

The annual pace of wage increases slid to 3.8% in August, only slightly above the 3.4% inflation recorded for July. (August’s inflation rate will not be known until the Consumer Price Index release on September 23.)

Softening wages in August may reflect the fact that jobs were created in the lowest-paying industry, accommodation and food services, but lost in higher-paying industries such as natural-resource extraction, public administration as well as professional, scientific, technical and business services. (Although hourly-wage data is not available for educational services, where jobs were also created, weekly-earnings data indicates that this industry pays less than the industries that eliminated jobs.)

Another factor is that workers, especially workers not represented by unions, have very little bargaining power in today’s worsening labour market.

Wages in Ontario and BC

Wage growth was anaemic in the two provinces that once boasted Canada’s highest wages. Ontario’s wage growth slowed from 3.5% in July to only 2.8% in August, the lowest of any province. British Columbia’s wage growth slowed from 5.0% to 3.4%. Using July’s inflation numbers, this wage slide would add British Columbia to the list of provinces where real wages stagnated over the past year.

The average hourly wage is now a few cents lower in British Columbia than in the country as a whole ($21.07 vs $21.13). Although Ontario wages ($21.99) remain above the national average, wages for young workers (ages 15 to 24) in Ontario have fallen below the national average for young workers ($11.80 vs $12.39). This development is ominous for the future of Ontario’s labour market.

UPDATE (Sept. 6): Ottawa Citizen coverage