Strong economic growth continued to lift B.C. wage earnings in June, adding to momentum observed since late 2016. Average weekly earnings climbed 0.5% to $944.50, slightly outpacing the national gain of 0.3%. While year-over-year growth was aligned with the national increase at 1.8%, the recent trend in B.C. has generally outperformed.
Smoothing out monthly variation with a three-month average of weekly earnings, industries with the strongest year-over-year rates of pay growth have included mining extraction, manufacturing, management services, and accommodations and food services, pointing to relatively broad-based growth in income aligning with current economic growth drivers. That said, the trend has decelerated across the goods sector, including forestry, mining and manufacturing, which could point to a slowdown related to wildfires and lumber protectionism. Earnings in the services sector continued to climb.
Various factors contribute to average weekly earnings, including changes in sectoral composition of employment and number of hours worked, and headline growth, while solid, likely underestimates wage inflation. Year-over-year growth in the fixed-weighted measure of average hourly earnings (which adjusts for industry composition) reached 5.9% in June with an average 4.2% in the second quarter. This is consistent with a low provincial unemployment rate. Increased hiring may be offsetting the need for overtime hours. Payroll counts during the month were up 3.3% on a year-over-year basis – well above the 1.8% national gain and second only to Prince Edward Island.
The combination of employment growth and wage gains is forecast to lift labour income by more than 6% this year, underpinning strong consumer demand.
Meanwhile, optimism among small businesses in B.C. slid for a second consecutive month in August, according to the latest Canadian Federation of Independent Business Business Barometer reading, but the group remained a relatively confident bunch. The index value fell 2.5 points from July to 63.3 points on a scale of zero to 100. This was down a similar magnitude from a year earlier. A reading above 50 points means that of the businesses surveyed, more than half expect stronger business conditions over the coming year.
While expectations have eased from mid-year, levels are generally within the range observed for the past two years, which has coincided with strong economic growth averaging more than 3%. Optimism is also higher than the national reading, albeit behind six other provinces.
Bryan Yu is deputy chief economist at Central 1 Credit Union.