Lana Payne letter to Bank of Canada Governor Tiff Macklem

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Mr. Tiff Macklem
Governor, Bank of Canada

Dear Mr. Macklem,

 

Over the past many months, I have made public comment on monetary policy as it has serious impacts on the workers of Canada and their families as well as the economy.

Unifor represents 320,000 members across Canada in many of the country’s economic sectors and the Bank of Canada’s decisions affect many aspects of their working conditions and lives.

I am writing to encourage the Bank of Canada to follow the lead of the US Federal Reserve and make a significant cut to the Policy Interest Rate immediately. 

On various measures, Canada’s labour market is showing increasing signs of weakness. Unifor’s monthly Labour Market Insights publication provides information on youth employment and on precarious work. The data shows that work is becoming more precarious and young workers are facing challenges when it comes to securing employment. We know worsening conditions for young workers are often the first sign of a weakening labour market.

Through the summer, the number of young workers who were not in employment, education or training jumped by 18.4% between August 2023 and August 2024. Canada is now home to 2.1 million young people not working or going to school and youth unemployment is hovering at levels not seen since the aftermath of the 2008-09 recession. These numbers showed some improvement in September as some young people went back to school but even still the number of young people not in employment, education or training was 8.8% higher this year than last.

In addition, work is becoming more precarious. The underemployment rate increased by 1 percentage point between September 2023 and September 2024. The gap in the hourly pay of men vs women increased by 7.1%. Part-time work is growing faster than full-time work and the incidence of low wage work has reached nearly 21% - that’s 1 in 5 workers in Canada working for low wages. Employment Insurance benefits are inaccessible to a growing pool of unemployed workers. 

While the labour market is deteriorating many of Canada’s industries are too. Canada’s forestry sector is facing serious headwinds. Canada’s aerospace sector needs an employment and investment boost just to catch up to pre-pandemic activity levels. Delays in major greenfield EV supply chain investments and new vehicle product program starts are resulting in extended downtime, and uncertainty, for tens of thousands of laid-off Canadian autoworkers – reflective of an extraordinarily slow recovery in North American car sales. And despite sizeable consumer demand for new housing construction, major high-density projects (including condominium developments in fast-growing cities) face delays due to high borrowing costs and uncertainty over slow-moving rate cuts. This housing slowdown is happening despite billions of federal dollars committed to bolstering Canada’s affordable housing stock. 

The slow-moving reduction in Canada’s policy rate is making each of these crises worse and making it harder for federal and provincial governments to do what’s necessary to solve each one of them.

Year-over-year inflation is back down to 2% in the month of August, following four consecutive months of steady decline. In declined again in September to just 1.6%.

Inflation is expected to stay in the Bank’s target range for the foreseeable future. You said in September that Canada needs to “stick the landing” now that inflation is back under control. Sticking the landing requires cutting the interest rate by 50 basis points as soon as possible to ensure the policy rate aligns with the state of Canada’s sluggish economy, and the lived experience of Canadian workers. 

Right now, I would suggest, there is danger of Canadians losing confidence in the Bank of Canada. The run-up in inflation; the strategy to increase unemployment; downloading the worst impacts of high rates on workers with a call to keep wages low have all eroded trust in monetary policy decision making.

At the macro level the landing is shaky at best. I am sure the Bank would not wish to be the cause of a recession and yet as mentioned above there are many worrisome economic signs. At the micro level there has been substantial and unnecessary negative impacts for individuals and families across this country. It’s past time to reverse that pain. 

I look forward to continuing this conversation with you in November.

Sincerely,
Lana Payne 
Unifor National President