|The labour market remains a bright spot for the Canadian economy, and income growth has boosted consumer spending and housing this year. The unemployment rate remained at a mere 5.5% in October–just one tick above a 45-year low–and best of all, wage gains for permanent employees surged 4.4% year-over-year, the best reading in ages. Accelerating wage growth is a sign that the tight labour market is boosting pay. With overall inflation at only 2% or less, real family purchasing power is rising. As well, hours worked advanced 1.3% from a year earlier, matching September’s pace.
There is nothing in this report that changes the Bank of Canada’s likely actions. I believe the Bank will remain on the sidelines when it meets again in December, but could well take an “insurance” rate cut early next year. Bank of Canada Governor Stephen Poloz, one of the few central bankers to resist the global push for lower interest rates, acknowledged he’s begun to consider the merits of joining other countries in lowering borrowing costs. Currently, Canada has the highest overnight interest rate among the majors, as the US once again cut rates late last month. Poloz said that the Bank of Canada “is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist.” The Bank of Canada remains bullish on consumption and housing — which are being fueled by a robust labour market.