RBC economist warns wage growth could slip below inflation
Median base pay for Canadian job-changers climbed 5.6 percent year over year in August, against a 3.0 percent gain for job-stayers.
The August ADP Canada Pay Insights report, produced by ADP Research, puts median gross pay growth at 9.6 percent for job-changers and 4.4 percent for job-stayers, drawing on anonymized payroll transaction data covering roughly 1.6m Canadian private-sector workers each month.
"There is some bump that job changers experience from leaving one job and going to the other, but it's notable that that bump has been modest at 2.6 per cent," ADP chief economist Nela Richardson said on a media conference call reported by the Financial Post.
Richardson told that call, as carried by the Financial Post, that base pay refers to a worker's contract rate of hourly wages or salaried pay, a measure she said matters for reading labour market tightness and structural wage trends.
Gross pay, which takes in commissions, tips, bonuses, and overtime, signals labour market activity such as the decision to work more hours, she added.
According to the Financial Post, Richardson said on the call that gross pay figures show a 5.2 percent premium for job-changers over job-stayers.
She said the gap points to "a lot of labour market activity," and flagged wages as the link between inflation and the labour market over the next few months.
Nathan Janzen, assistant chief economist at Royal Bank of Canada (RBC), told the Financial Post that ADP's split between stayers and changers is a measure other Canadian data has not explored.
"It is pretty standard and well accepted that wage gains tend to be bigger for people that are switching jobs," Janzen said, adding the pattern shows up in other countries.
Weak economic growth makes workers more hesitant to move and employers less willing to hire because of the added cost, Janzen said in the same interview.
"That's one of the things that actually contributes to softer wage growth during a weaker labour market, and conversely, as labor markets start to strengthen, you tend to get more of those job switchers."
Prince Edward Island recorded the largest base pay increase for job-stayers at 4.2 percent, ADP reported, followed by Nova Scotia at 3.7 percent and New Brunswick at 3.5 percent.
Yukon sat lowest at 2.5 percent, with Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Ontario, and Saskatchewan all at 3.0 percent and Quebec at 3.2 percent.
By sector, the ADP data shows education and health services leading at 3.3 percent, with manufacturing and professional and business services at 3.2 percent and the remaining sectors, including financial activities and leisure and hospitality, at 3.0 percent.
Firm size made no difference: employers with one to 199, 200 to 499, and 500 or more employees all posted 3.0 percent.
Workers aged 25 to 34 saw the strongest base pay growth by age at 3.6 percent, per the ADP report, ahead of 3.1 percent for those aged 15 to 24, 3.0 percent for the 35 to 54 group, and 2.8 percent for workers aged 55 to 85.
Median base wage growth for the youngest group has halved since August 2023, when it stood at 6.2 percent, the Financial Post reported, while their median gross wage growth rose over the same period from 8.6 percent to 9.5 percent, above every older age group.
Janzen said Canadian wage growth has been balanced but is edging lower amid a softer labour market, trade tensions with the United States, and reduced worker bargaining power in wage negotiations, according to the Financial Post.
He said wage growth could track below inflation in coming months depending on energy costs.
Canadian inflation reached 3 percent in July, with gasoline prices up 25.7 percent year over year, the Financial Post reported citing Statistics Canada, while the agency's payroll data showed average weekly earnings up 3.4 percent over the same period.
"This is that supply shock that we've been worried about," Janzen told the Financial Post, though he said it has not appeared yet.
He said households facing inflation above wage growth could cut spending or borrow, which he linked to slower gross domestic product (GDP) growth, lower hiring demand, and a further weakening labour market.
ADP will release its September 2026 Canada Pay Insights report on October 8.
