Unemployment Reaches 43 year Lows – but Wages Stick and Stagnate
The Canadian job market continues on an upward trend, having added 163,000 jobs in 2018 – not too shabby for our population of 36 million. According to Statistics Canada, the country’s unemployment rate fell to 5.6% – the lowest rate since the agency began collecting data in 1976. Service industry jobs, including those in healthcare and social assistance, contributed largely to the gain.
However, experts have warned not to get too caught up in unemployment numbers, as other statistics show ‘warning signs’. Notably, wages have barely risen, and even decelerated in some industries, which means that even though more people are receiving a paycheque, their paycheques are not keeping up with the rising price of goods.
Wage growth data is an important factor in the Bank of Canada’s (BoC) decision-making process, particularly in relation to interest rate hikes. As we’ve reported before, the BoC has been steadily increasing the interest rate to where it now sits at 1.75%. The purpose of increasing interest rates is in part to discourage consumers from excessive borrowing.
And yet, Canadians still have some of the highest levels of personal debt – an average of $22,800 per person, excluding mortgages, meaning that as interest rates rise, so will debt service payments. With wages stagnating, its easy to see why these colliding factors are cause for concern for everyone from policymakers to everyday workers.
Speaking of Debt…
Loans on your mind? Same here. And we aren’t alone. According to a new pollreleased by CIBC, 26% of Canadians say paying down their personal debt is a top priority for the new year. Among those who took out a loan in 2018, 34% cited the need to cover day-to-day items, while 24% cited new vehicle costs, and 20% took on debt to pay for home renovation or repairs.
While we can all agree that being debt-free is an important goal, some financial planners are concerned that consumers are forsaking making deposits into their savings accounts in order to make larger payments towards their debt. And with 63% of Canadians fearing the stock market has hit its peak, people are even less inclined to invest their money.
If you are facing a similar dilemma, it might be best to develop a plan to tackle both debt repayment and building your savings. Check in with a financial professional, and find out how much you can put into a tax free savings account (TFSA). Check out our guide on TFSAs here.
GM Plant Closure Update
Back in November, we broke down the closures of the Oshawa General Motors plants. Since then, GM hasn’t budged on its decision shutter the auto-factory, which currently employs around 2,500 workers.
But that hasn’t stopped Unifor, Canada’s largest private sector union, which represents Canadian GM employees, from trying a number of strategies to keep the plant up and running. Beyond numerous protests and walkouts, Unifor released a commercial this week, admonishing GM for moving manufacturing jobs to Mexico despite taking an $11 billion bailout from the Canadian government during the financial crisis, with the tag line, “Hey GM – You Want to Sell Here? Build Here”.
Unifor met with representatives at GM headquarters in Detroit this week, but were unable to come to an agreement, with GM reiterating its plans to close the plant in December 2019. Following the meeting, Unifor national president Jerry Dias called on the government to advocate on behalf of the plant workers, stating “I’m frankly disgusted by the silence of our governments”.
The closure of the Oshawa plant has garnered significant attention, in part because it serves as a tangible example of how automation will increasingly threaten manufacturing jobs.