B.C. weekly earnings rebounded in August

A strong economic backdrop helped drive momentum for B.C.’s non-farm payrolls and average weekly earnings in August.

Following a July slip, average weekly earnings rebounded 0.4% to $940.31 in August. Year-over-year growth reached 2.2% compared with a national increase of 1.7%, with gains well diffused across industries. Year-over-year growth was strongest in resource extraction (excluding forestry) at 6%, real estate rental and leasing (6.4%), management and administrative services (9.5%), educational services (6.2%), and accommodations and food services (7.1%). Notable declines were found in forestry and information and cultural services.

That said, various factors affect average earnings, including number of hours worked, overtime, and industry and occupational composition. There are signs that wage momentum might have slowed, with an easing in the fixed-weighted hourly earnings index, which holds hours and industry composition constant, to 1.5% year-over-year from above 3% in the first half.

Non-farm payroll counts jumped 0.6% from July to propel year-over-year growth to a robust 3.8%, compared with a 2.4% national gain. August’s year-over-year increase was led by the higher-paying goods-producing industries, specifically forestry, logging, mining and construction.

While there are some mixed signals on strength of wage inflation, rising weekly earnings and strong employment growth point to a strong year for labour income growth. We forecast personal income growth of 7% this year, driven by employee compensation, with a 5% increase in 2018.

Meanwhile, wholesale trade rose faster than the national pace in August and continued to outperform all other regions, reflecting strong consumer demand and intermediary demand by exporters. Sales rose 0.7% to $6.73 billion in August compared with a 0.5% national gain on the strength of motor vehicles and machinery, equipment and supply, with the year-over-year growth at 15.2%.

Year-to-date sales rose nearly 12% through August and are on track to exceed the previous growth record of 10% in 2004. While Canadian wholesale prices are not a perfect proxy for B.C., wholesale price inflation of 1.5% points to a robust real gain of more than 10% through August.

The pace of wholesale trade, however, is unsustainable and will decelerate in 2018 as economic growth slows from more than 3.5% to about 2.5%. Nonetheless, growth in wholesale trade is expected to remain positive and track closer to 5%. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.