Canadians saw their average wage surge at the fastest pace in months, according to Statistics Canada (StatCan). The surge reported in March stands in stark contrast with the reality of other datapoints, and for good reason—wages aren’t booming. The surge was due to a dramatic composition change, according to BMO Capital Markets, who warned investors this week that reality is much more modest.
Canada’s Wage Growth Surges to 4.7% Amid a Loosening Job Market
Canada reported a massive wage hike last month, with annual growth reaching 4.7% in March. It was the largest increase since October 2024, when things were rosier across the country.
“In the roughly year and a half since then, the job market has loosened significantly… Against that backdrop, a 0.7 ppt acceleration in wage growth in a single month sticks out indeed,” notes BMO Senior Economist Shelly Kaushik.
Those skeptical aren’t entirely wrong to question how this conflicts with reality.
Canadian Wage Growth Is Much Lower After Adjustments
There’s no sudden economic boom sending everyone’s paycheque higher. StatCan explained that this was a statistical quirk that was created by a shift in occupations and job tenure. In other words, the composition rapidly changed, causing the measure to appear much higher than many anticipated.
“…controlling for those factors reveals a 3.6% yearly growth rate, little changed over the last four months,” explains Kaushik.
Source: StatCan; BMO Capital Markets.
Little change from last year may seem like an improvement with inflation’s moderation. However, recall that headline CPI was 1.8% in February, but it was also impacted by a composition issue. Excluding gas, CPI came in at 2.6%—before the temporary base effect from the carbon tax removed 0.7 points, according to the Bank of Canada. It may not be quite the windfall previously presented. What happened?
Migration and Aging Workforce Skewed The Average
Two major factors played a role in this distortion: immigration and a rapidly aging workforce. The recent pullback on non-permanent residents has disproportionately removed low-income wage earners from the measure. Job losses have also largely been concentrated in more entry-level and low-skilled roles, leaving fewer people with modest incomes to pull the averages down.
“This jibes with some macro trends: recent net outward migration disproportionately affects workers (e.g., temporary foreign workers and students) in lower-paying jobs,” explains the bank. “Together with underlying aging, that could also skew the pool of employees towards those who have been in their jobs for longer.”
Canada has seen an unusually sharp uptick in aging in its most expensive cities, like Toronto. The older, more experienced workforce isn’t necessarily benefiting from sharp wage hikes, but their tenure drags the average higher.
Great blog, Daniel. However, while wage growth may have been overstated, real wage growth is still arguably a matter of concern. The 0.7% exit effect that drew down the February 2026 inflation rate was linked to Chrystia Freeland’s expensive political gimmick, the temporary GST/HST rebate, being removed, not the consumer carbon tax. But why would you want to remove it, since it makes the overall inflation rate less attuned to recent price movements, not more attuned? As for looking at the CPI excluding gasoline prices instead of the overall CPI inflation rate, that strikes me as special pleading. Gasoline price movements are an integral part of consumer price inflation. An increase in real wages of approximately 1.8% is considerable. Granted, it will almost certainly be something smaller when we get the March 2026 inflation update on Monday.