In a surprising twist, Canada’s labour market forged ahead last month, delivering greater job growth than anticipated, and staving off a rise in the unemployment rate – a glimmer of hope amidst mounting concerns about an economic slowdown. An impressive 40,000 new roles were created in the economy, a figure that comfortably doubles the consensus projections made by economists.
On Friday, Statistics Canada dispelled recent anxieties by announcing a steady jobless rate of 5.5 percent for August, thereby quashing a three-month sequence of escalating unemployment. “This year, Canada’s job market has been intermittently soft, then resilient. This time around, it’s the rebound’s turn,” obliquely refers the Chief Economist of BMO, Douglas Porter.
This heartening jobs report infuses commensurate hope into our financial markets, dismissing the need for immediate rate reductions and opening up to the potential uptick in interest rates. However, economists often dwell more deeply in economic tendencies than in singular monthly indicators.
The ever-changing nature of employment figures mandates a more comprehensive view. According to Andrew Grantham, CIBC’s director of economics, “The underlying pattern observed over the past three to six months does indicate employment growth, albeit at a pace that lags behind our population increase.”
Statistics Canada underlines that noticeable monthly job inclines are imperative, given the country’s robust population surge. The agency’s labor force surveys reveal an average monthly population growth of around 81,000 this year, which necessitates a parallel job growth of approximately 50,000 per month for a steady rate of unemployment.
Notably, there was augmented employment in professional sectors, scientific and technical services, and construction. Conversely, there was a contraction in the services of education and manufacturing.
However, the positive job figures observed last month don’t necessarily reflect the complete state of the labor market. Statistics Canada’s findings suggest a decline in job-switching rate since its peak in January 2022 and a longer job-hunting period compared to last year, due to a fall in job vacancies.
This recent assessment of the labor market is revealed just after the Bank of Canada chose to keep its key interest rate at five percent, influenced by recent data indicating a potential economic downturn, including a contraction in the second quarter GDP.
Meanwhile, though the labor market has cooled down a bit with falling job vacancies and a slightly elevated unemployment rate, the central bank maintains its concerns about persistently high inflation. It’s seeking further evidence to support indications of a slowing growth trajectory including in the labor market.
The job report does little to allay the central bank’s worries about wage rises, with a witnessed year-on-year increase of 4.9%, marginally lower than the 5.0% from the previous month. Nevertheless, economists predict that the economic deceleration might eventually lead to smaller wage increments for workers.
