Update on Falling Real Wages
I’ve blogged on this before, and continue to be surprised by the lack of attention paid to the significant ongoing decline of real wages.
Falling wages are a key indicator of a very soft job market, and have the potential to undermine still quite strong household spending.
Today’s Statscan release of the payroll data show that Average Weekly Earnings including overtime in September were $872.75, up just 1.1% from a year earlier. TheÂ change was entirely explained by changes in hourly wages since average weekly hours worked were unchanged.
Fixed weighted average hourly earnings excluding overtime were up just 0.7% from a year earlier, showing that wage stagnation is not being driven by anÂ overall shift of workers into industries which pay lower hourly wages. That said, there were major regional differences, with wages falling even in nominal terms by 1.3% year over year in Ontario.
The September Labour Force Survey data – based on a survey of workers as opposed to employers – confirms the overall picture, with average hourly wages increasing by just 1.4% year over year.
Meanwhile, the Consumer Price Index rose by 3.2% in September.
If the average worker is experiencing a 2% annual loss in real wages, we can surely expect a decline in consumer spending and difficulties in the housing market notwithstanding low interest rates.