Interest rates will keep rising until the labour market cools.
At the beginning of March, there were 158,1000 open positions in the food service industry.
Photo by REUTERS
Statistics Canada reported on May 26 that Canadian employers were looking to fill a record 1.03 million positions in March. What you need to know is here.
There were job vacancies that were on a downward track. It was difficult to get staff back as restaurants and hotels started making plans for the summer. At the beginning of March, there were 158,1000 open positions in the food service industry. The hotel and restaurant sector has the highest vacancies rate among the 20 industry groups monitored by Statistics Canada.
The previous peak in September was matched by the overall vacancy rate. The previous record was 988,000 vacancies that month. In February, the number of vacancies had dropped to about 826,000. Maybe not.
The Bank of Canada's interest rates will be influenced by the amount of vacancies in the market, as they offer a window on the extent to which supply and demand are balanced. The Bank of Canada Governor said last month that he thought a soft landing was possible because employers might adjust to higher interest rates by cutting unfilled positions. If vacancies start to fall, policymakers could be persuaded to take a softer path to a higher interest-rate setting. If vacancies stay high, central bankers might accelerate their interest-rate increases as the mismatch between supply and demand will likely put upward pressure on wages, which will in turn fuel inflation.
Stephen Poloz, the previous central bank governor, said recently that the labour market will be the best source of data on where the economy and interest rates are headed.
In March, average weekly earnings increased 4.3 per cent from a year earlier, compared with a year-over-year increase of 2.1 per cent in February. It was the biggest increase since January 2011.
Wage increases of that size might not be enough to satisfy workers. The consumer price index increased in March and April, suggesting that the cost of living is rising faster than wages. With talent scarce, the odds are good that workers will find someone willing to pay them what they want. Employers would feel pressure to raise their prices to make up for higher wage costs.
Statistics Canada surveys employers to collect vacancies data, so they go directly to the source. The agency's Labour Force Survey, which relies on interviews of households, is published with a large margin of error. TheLFS was released with a lag of only a month. The unemployment rate dropped to a record low of 5.2 per cent in April.
The data doesn't have a long history and the figures aren't seasonal. Statistics Canada recognizes the shortcoming and said in its latest report that it is working on smoothing the data to reflect natural fluctuations that come with seasonal employment. The agency said that vacancies increased from September to December, then decreased in January and February before increasing again in March.
The prospect of a summer free of COVID restrictions appears to have caused more demand than companies can handle. It will put upward pressure on wages and put upward pressure on inflation. The Bank of Canada is expected to raise the interest rate by half a point next week, and more increases are expected until there is evidence that the labour market is cooling.
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