Feeling It in Our Wallets

This is another demonstration that the unemployment rate is not always a good indicator of the performance of the macroeconomy, as demonstrated in a recent paper from the Macdonald-Laurier Institute (Cross 2018a) launching this series of quarterly updates on Canada’s labour market. [...] The softening of labour market conditions confirms the weakness predicted by the Macdonald-Laurier Institute Leading Economic Indicator (see, for example, Cross 2018b), and is borne out by the steady slowdown in the growth of real GDP since mid-2017. [...] This immediately raises the question of why low unemployment is not reflected in higher wages, the basis of the Phillips Curve trade-off that has guided macroeconomic policy for much of the post-war era. [...] Part of the problem reflects the great deal of inertia in the LFS measure of earnings; respondents are only asked their wage in the month they enter the survey, after which their wage is assumed to be unchanged for the next five months they remain in the survey before rotating out. [...] The broadest measure is total labour income, which includes the effect of the earnings of people working, the The Seph data number of hours they work, and the wide range of supplementary show annual hourly labour income they earn.