June 2023
Spotlight on data and research
Labour market imbalances: Evidence from the Canadian Economic Tracker
The Canadian Economic Tracker, released on May 16th, 2023, is a new data visualization tool combining selected monthly indicators of economic activity from Statistics Canada’s Common Output Database Repository (CODR) into a unified, customizable interface. A new series of articles will use the tracker to explore and interpret the trends and dynamics affecting Canadians as economic activity continues to rebound from the COVID-19 pandemic.
This first article in the series, gleaned insights on the labour market from the indicators in the tracker. It found that labour market imbalances persist but vary across industries. For instance, unmet labour demand has eased in accommodation and food services, and manufacturing. However, there has been little sign of vacancies easing in health care and social assistance.
Inflationary pressures, wages and profits
This article found that unit labour costs (labour costs per unit of output) accounted for all of the growth in the gross domestic product (GDP) deflator in 2020. In 2021, the contribution of unit non-labour costs became more dominant at 67.5% (5.5 percentage points of the 8.2% growth in the GDP deflator). In 2022, the contributions were more equal but the contribution of unit non-labour costs was still larger at 55.5% (4.1 percentage points of the 7.3% growth in the GDP deflator).
Over all three years, unit non-labour costs contributed slightly more than unit labour costs (51.7% to 48.3%) to the cumulative growth in the GDP deflator. The contribution of unit non-labour costs was larger than its share of GDP in 2019 (43.0%).
Insights
Immigrants’ sense of belonging to Canada by province of residence
Immigrants’ sense of belonging to Canada is a well-documented measure of their social integration, however, it differs by sociodemographic characteristics such as years since immigration, age at immigration, admission category and population group. This study finds that sense of belonging also varies modestly by province of residence. Generally, sense of belonging to Canada was strongest among immigrants living in Atlantic Canada and Ontario, and weakest among immigrants in British Columbia and Alberta.
The difference in sense of belonging between immigrants in Alberta and Ontario was attributable to the sociodemographic composition of Alberta’s immigrant population (characteristics such as years since landing, population group, age group and education), perceptions of discrimination and differences in structural conditions (unemployment rates, median income and size of the immigrant population) between Alberta and Ontario. These factors did not explain the difference between immigrants in Ontario and British Columbia.
Import prices and inflation in Canada
As the price of imports rise, so too will the price of final domestic demand (FDD) and many of its components, including the prices faced by households. This article found that import prices began contributing to the growth in the price of FDD in the third quarter of 2021. In that quarter, the increase in import prices accounted for 25.3% of FDD price inflation (1.1 percentage points of the 4.3 percentage point increase in FDD price inflation). This contribution grew in subsequent quarters, reaching 51.9%, 47.4% and 51.0% in the second, third and fourth quarter, respectively, of 2022. The estimates of these contributions represent an upper bound of the impact of import prices given that it is assumed the rise in import prices are fully passed through to the prices faced by households, businesses, and governments.
Markups and inflation: Evidence from firm-level data
This study finds that between the last two years before the COVID-19 pandemic and the second quarter of 2022, the aggregate markup for non-financial businesses, excluding oil and gas industries, increased by 2.6%. This increase is relatively small compared with measures of inflation over the same time period. For example, Consumer Price Index inflation excluding energy rose by 10.5% over that time period.
While it is not possible to provide changes in the markup for detailed industries, the study shows that between the last two years before the pandemic and the second quarter of 2022, the markup in retail trade increased by 2.4%, slightly less than aggregate markup. In comparison, markups in manufacturing rose by 5.3% and markups in wholesale trade rose by 1.6% over the same time period. Given the size of the observed change, it does not appear that it is a main driver of inflation.
Related publications
Analytical Studies Branch Research Paper Series
- Date modified: