OTTAWA – Canada’s labor market continues to display resilience, defying the cooling economy. Recent data from Statistics Canada revealed stronger-than-expected hiring and a modest increase in wages.
In September, the number of employed working-aged individuals in Canada increased by 63,800 compared to the previous month. Meanwhile, the unemployment rate remained steady for the third consecutive month at 5.5%. Economists at TD Securities had projected an addition of 20,000 jobs with an unemployment rate of 5.6%.
Using the U.S. Labor Department methodology, Canada’s unemployment rate rose by 0.1 percentage point to 4.6%.
Concerns for Central Bank Policymakers
The labor market’s ability to maintain tightness may raise concerns among central bank policymakers. Although they have expressed openness to raising interest rates, they are wary of over-tightening monetary policy and jeopardizing the economy’s stability. Inflation has cooled at a slower pace than anticipated, and recent months have even seen an acceleration, despite other indicators signaling weakening demand and a significant economic slowdown.
Accelerating Wage Growth
September saw another acceleration in wage growth, a crucial area of concern for the central bank. Average hourly wages for permanent employees experienced a 5.3% monthly increase, following a 5.2% rise in the previous month. This points to mounting inflationary pressures.
Indicators of Job-Market Resilience
Additional indicators highlight the job-market’s resilience. Total hours worked remained virtually unchanged in August compared to the previous month, increasing by 2.6% compared to the same period last year. The employment rate, representing the proportion of individuals aged 15 and older who were employed, also saw a slight increase of 0.1 percentage point to 62.0%, compensating for the decline in the prior month.
Over the past year, the job market has considerably loosened, which is notable given Canada’s rapid population growth. Until more recently, the unemployment rate had been slowly rising.
As Canada’s labor market continues to exhibit strength, policymakers face the challenge of balancing the need for continued economic growth with the potential risks associated with tightening monetary policy too quickly.
Population Growth Outpaces Job Growth in September
The growth in population once again exceeded the growth in job opportunities in September, as the working-age population of those 15 and older increased by a staggering 82,100. Unfortunately, employment has only grown at an average rate of 30,000 per month since the beginning of the year, falling short of the roughly 50,000 monthly jobs needed to maintain a stable employment rate.
Increase in Part-Time Employment
The data for September reveals that the majority of new jobs added were in the part-time sector. Part-time employment has seen a growth rate of 1.9% since the start of the year, surpassing the 1.0% growth seen in full-time positions.
Education Services Drive Job Growth
Education services played a significant role in the increase of jobs for the month, offsetting the decline experienced in August. The data agency also acknowledged that slight variations in when school-year contracts begin and end can impact industry changes on a month-to-month basis.
Bank of Canada’s Policy Rate Decision
The Bank of Canada is scheduled to announce its policy rate decision on October 25. In the previous month, they maintained their benchmark rate at a 22-year high of 5% after consecutive quarter-point increases in June and July.
Economic Output Contraction and Inflation Increase
Unexpectedly, economic output contracted on an annualized basis during the second quarter. Moreover, industry-level growth in gross domestic product remained stagnant in July and only experienced a slight increase of 0.1% in August. Despite this, consumer-price inflation accelerated for the second consecutive month in August, reaching 4%, twice the Bank of Canada’s target rate of 2%.
Job Sector Movement
According to the monthly jobs report, employment in transportation and warehousing continued to rise, while there was a decrease in finance, insurance, real estate, and leasing sectors. Construction employment also experienced a decline, partially offsetting the increase observed in August.
Self-Employed and Public Sector Workers
The number of self-employed individuals increased for the second consecutive month in September, rising by 1.0% following a 1.9% gain the previous month. Public sector employee numbers grew by 0.9% in September, while the private sector saw little change, according to the agency.