According to Jinshi Data, Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce Capital Markets, said that the overlooked productivity data should comfort the Bank of Canada that the threat of labor costs to inflation is weakening.
According to Statistics Canada, average hourly earnings increased 5% year-over-year, well above the 2% inflation target. However, second-quarter productivity data showed a welcome slowdown in business sector payroll growth. Hourly earnings increased 2.9%, well below the 7.1% peak expected in 2022.
Unit labor costs also slowed, increasing by 3.5% in the second quarter, down from a 5.7% increase in the third quarter of 2023. In short, the Bank of Canada should speed up the pace of interest rate cuts.
