Rising wages lack the productivity to support them
In moving into a holding pattern on interest rates Wednesday, the Bank of Canada was in a pretty upbeat mood.
“Employment growth has been surprisingly strong,” the bank said in Wednesday’s seven-paragraph statement announcing“Wages continue to grow at 4 per cent to 5 per cent [year-over-year] while productivity has declined in recent quarters.” Now, six weeks later, it’s pointing to those wage inflation and productivity readings in a very public way – and neither is going in the right direction.
It doesn’t take a PhD in economics to see how those unproductive labour costs represent a serious inflationary pressure. Unless the wage growth slows or the productivity accelerates, the Bank of Canada has a problem toning inflation down to its desired 2 per cent.
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