MNI BRIEF: Canada Firms See Wage Problem After BOC Warning

Canadian firms have never been so worried about wage demands with a record 65.3% of managers calling them an obstacle, a trend which could rattle a central bank that recently told executives not to build elevated inflation into long-term labor contracts.

The share of firms calling wages a problem climbed for five straight months through August from a recent low of 58.7% according to the Canadian Federation of Independent Business survey published Thursday. While wages have often been a big concern in CFIB tracking, the latest reading is the highest in figures back to 2009 and suggests urgency in tightening monetary policy.

For a central bank worried about entrenched inflation and a potential wage-price spiral, the survey shows the wage figure almost as high as the 71.8% of firms who see trouble with energy costs. BOC Governor Tiff Macklem told a CFIB event last month "as a business, don't plan on the current rate of inflation staying. Don't build that into longer term contracts." Another government labor market adviser says while a wage-price spiral is unlikely, higher rates put the economy at risk of recession. (See: Canada Faces Recession, Not Wage Spiral-Adviser)

Source: CFIB