Consecutive job increases support the argument for the Bank of Canada to maintain interest rates in December, according to economists.

Canada’s Labor Market Surprises with Job Gains

Canada’s labor market saw a significant increase of 66,600 jobs in October, and the unemployment rate dipped to 6.9%. This marks the second consecutive month of unexpected positive results, as reported by Statistics Canada on Friday.

Economists had anticipated a loss of about 20,000 jobs, projecting an increase in the unemployment rate from 7.1% to 7.2%, based on estimates from the Bank of Montreal.

“While it’s probably premature to say definitively, this might indicate the beginning of recovery for an economy that’s faced challenges,” noted Desjardins economist Royce Mendez in his client communication. He suggested that this data supports the notion that the Bank of Canada could remain steady on interest rates during their next meeting, following the easing in September and October.

Many analysts seem to agree that the October figures imply the central bank will maintain current rates in December. CIBC economist Andrew Grantham stated, “Overall, today’s data reinforces the Bank of Canada’s view that interest rates are sufficiently low to spur economic activity, and we don’t foresee any further cuts.”

However, despite the encouraging numbers, some economists caution that the overall situation hasn’t significantly improved. “This report demonstrates some resilience within Canada’s labor market, but it doesn’t indicate strong growth,” commented Leslie Preston from TD. “General job market conditions still appear weak.”

Mendez further highlighted that the employment gains were not widespread, with increases mainly in retail trade and warehousing sectors.

Digging deeper into the numbers, it turns out that the job increase stemmed solely from part-time work, which rose by 85,000 positions, while full-time roles actually decreased by 18,500. Ontario led the charge with a gain of 55,000 jobs across sectors like retail, transportation, and recreation. BMO’s chief economist Douglas Porter suggested that some of Ontario’s job growth might be temporary, pointing to a rebound linked to events like the Blue Jays’ playoff run. Interestingly, the construction sector experienced a decline, losing around 15,000 jobs. Wages did see a year-over-year rise of 3.5%, bringing the average hourly wage to $37.06.

According to agency reports, the cumulative increase in employment over September and October (+127,000, or +0.6%) effectively counters the earlier contractions noted in July and August (-106,000, or -0.5%).

The labor force survey has shown considerable fluctuations lately, with September’s increase following sharp job losses in the preceding two months, which followed an unexpected spike in jobs in June.

On a positive note for October, private sector jobs increased by 73,000, marking the first rise since June. Youth employment also ticked upward, with a gain of 21,000 in October—the first since January, according to Statistics Canada. This led to a 0.4 percentage point increase in youth employment rates to 54.2%, while unemployment for 15-24-year-olds fell by 0.6 percentage points to 14.1%, marking its first drop since February. However, the agency points out that these youth employment rates are still significantly below a high of 59.6% noted earlier this year.

Despite these job gains, the total hours worked actually fell by 0.2% in October, largely due to about 87,000 workers losing jobs during labor disputes that week. Statistics Canada indicated that this decline was particularly noticeable in Alberta, which faced school disruptions due to a teacher strike and lockout.