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Senior Deputy Governor Carolyn A. Wilkins discusses developments in the Canadian labour market and factors that may help explain why wage growth is slower than expected.

Since the April Monetary Policy Report, there have been a number of unanticipated developments that have changed the outlook for inflation and economic activity in Canada.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

Global trade growth has been weak during the period following the 2007–09 financial crisis. This is an important development for Canada, given the Canadian economy's high degree of openness to trade. This article investigates some of the factors behind the slowdown in global trade and finds that the weakness of global demand and its changing composition, increased protectionism and diminishing incentives to expand trade have all played a role. Some of these factors are likely to have only a temporary effect on trade growth, but others could be more long-lasting.

Using newly matched data on US defense contracts and restricted administrative employment data, we show that the employment effects of defense procurement are costly, concentrated and slow to diffuse.

Results from the winter Business Outlook Survey suggest that business sentiment is broadly positive except in the Prairies, where indicators remain weak. In aggregate, firms’ outlook is supported by expectations of healthy domestic and foreign sales.

Business conditions have deteriorated due to the trade conflict with the United States, according to results from the Business Outlook Survey and the Business Leaders’ Pulse. Sales outlooks have softened, particularly for exporters. Firms reported having sufficient capacity, and many are delaying investment and hiring decisions amid uncertainty. Firms expect that widespread tariffs would raise costs and lead to higher selling prices. In this context, expectations for inflation are higher than they were last quarter.

Deputy Governor Timothy Lane explains how the Bank is helping Canadian households and businesses weather the COVID-19 crisis, and how our actions today are laying a solid foundation for our future economic recovery.

Foreign direct investment inflows are positively related to growth across developing countries—but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit in developing countries together with general equilibrium effects.

We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. Our model can generate more sizable inflation surges due to cost-push and demand shocks than a standard linearized model when inflation is high.