Canada’s labor market beat expectations with jobs gains, but a rising unemployment rate and a drop in hours worked signal mounting economic weakness toward the end of this year.
The country added 25,000 jobs in November, while the unemployment rate rose 0.1 percentage points to 5.8%, a 22-month high, Statistics Canada reported Friday in Ottawa. The jobs figures topped expectations for a gain of 14,000 positions but matched the expected jobless rate, according to the median estimate in a Bloomberg survey of economists.
Wage growth for permanent employees held steady at 5%, slightly faster than expectations for a 4.9% rise.
While the data show an economy that’s churning out better-than-expected job gains, the pace of hiring is stuck below the population-driven expansion of the labor force, suggesting a slowdown in employment demand. Growth in the population due to high levels of immigration continued to outpace job gains.
Still, wage growth has been stuck at or above 5% for five straight months, which are levels Bank of Canada Governor Tiff Macklem has said are inconsistent with a timely return to the 2% inflation target. He said last week that excess demand is gone and the economy is expected to remain weak for the next few quarters, which would help slow the pace of price gains.
The report came a day after gross domestic product data showed the economy unexpectedly contracted in the third quarter and consumption flatlined, confirming that the central bank’s aggressive interest-rate hikes have slammed the brakes on growth. Third-quarter GDP fell at a 1.1% annualized pace, nearly wiping out all the growth in the previous quarter.
Last month, total hours worked fell 0.7% on a monthly basis, and were up 1.3% from a year ago. That’s the biggest monthly decline since April 2022, mainly driven by losses in the finance, insurance and real estate industry. It confirms weak economic momentum at the middle of the fourth quarter and also shows that higher interest rates are already cutting into hours and employment in rate-sensitive sectors.
Employment in the finance, insurance and real estate sector fell by 18,000 in November. Since July, employment in this industry has declined by 63,000, the steepest decrease of any sector over the period. Wholesale and retail trade shed 27,000 jobs last month, and employment in the industry was at its lowest since in December last year.
The jobs report is the last key input for policymakers before the next rate decision on Dec. 6. The majority of the forecasters in a Bloomberg survey expect the central bank will keep rates unchanged for a third straight meeting and hold them at 5%, a likely end point in this tightening cycle. Markets and economists expect policymakers to start cutting rates in the first half of next year.
The participation rate held steady at 65.6% in November.
The employment rate — the proportion of the working-age population that’s employed — fell 0.1 percentage points to 61.8%. The employment rate has decreased in four of the past five months, and has generally trended down since January, when it reached a recent high of 62.5%.
The unemployment rate has risen 0.8 percentage points since April. Compared with a year ago, unemployed people in November were more likely to have been laid off from their previous job, reflecting more difficult economic and labor market conditions, the statistics agency said.
Job gains in November were led by increases in manufacturing and construction. Regionally, employment rose in New Brunswick, while it fell in Prince Edward Island and was little changed in all other provinces.
Among Canada’s largest population centers, the unemployment rate was highest in Windsor, St. Catharines-Niagara and Oshawa — all in Ontario. St. Catharines-Niagara and Oshawa also recorded the largest unemployment rate increases from April to November.
--With assistance from Erik Hertzberg.
Author: Randy Thanthong-Knight