Canada’s October Job Market Surprises Economists
Statistics Canada reported on Friday that in October, Canada’s labor market added 66,600 jobs, while the unemployment rate dropped to 6.9%. This comes as a surprise, exceeding expectations for the second month in a row.
Analysts had predicted a loss of about 20,000 jobs, anticipating an increase in the unemployment rate from 7.1% to 7.2%, according to the Bank of Montreal’s estimates.
Desjardins economist Royce Mendez pointed out that though it might be premature to say, this could signal the initial stages of recovery for an economy that has been facing challenges. He believes this data supports the notion that the Bank of Canada will maintain interest rates in the coming month.
Other economists, like CIBC’s Andrew Grantham, suggested that the latest labor force figures could bolster the central bank’s decision to keep rates stable. Grantham remarked that the indicators affirm the Bank of Canada’s assessment that current rates are conducive to economic stimulation, leading to expectations of no further cuts.
Yet, some analysts cautioned against taking the good news at face value. For instance, TD’s Leslie Preston expressed that while the report reflects some resilience, it should not be mistaken for overall robustness; she described job market conditions as still weak. Mendez echoed this sentiment, highlighting that job growth was primarily concentrated in retail trade, along with transportation and warehousing.
The job increase in October was mainly attributed to part-time positions, which saw a 85,000 rise, while full-time jobs decreased by 18,500. Ontario led the way, adding 55,000 jobs in sectors such as retail and wholesale trade, transportation, and information services. BMO’s chief economist, Douglas Porter, suggested that some of this growth may be temporary, possibly connected to the excitement around the Blue Jays’ playoff games. Notably, the construction sector lost around 15,000 jobs, while average hourly wages increased by 3.5% year-on-year to $37.06.
Derek Holt from Scotiabank pointed to a potentially concerning trend, with month-over-month annualized wages surging to 9.6%, which he warned might elevate inflation owing to increased wage costs coupled with declining productivity.
Holt also urged caution regarding the monthly job gains, labeling the report as “a shaky survey exercise.” He noted that typical fluctuations in the Labor Force Survey could range around 57,000 jobs, suggesting that October’s increase might still be within the margin of error. Moreover, he pointed out that while Canada’s job market is expanding, the growth is largely occurring in low-wage and part-time positions. Nevertheless, he acknowledged that these results affirm the Bank of Canada’s current stance.
Canadian economist Brendon Barnard described the report as an extraordinary recovery, emphasizing that the increase in part-time employment followed two sharp declines. He mentioned that part-time work will likely continue to fluctuate without a clear trend. Barnard commented that while the labor market appears softer than last year, it hasn’t shifted dramatically, with last year’s unemployment rate at 6.6%.
October also saw a surge in private sector employment rising by 73,000, marking the first uptick since June. However, the youth employment rate still faced challenges. Despite improvements, young individuals encountered tough labor market conditions, with the youth employment rate only slightly up at 54.2%.
In an interesting twist, total hours worked dipped by 0.2% in October, largely due to around 87,000 employees losing jobs amid labor disputes, particularly noted in Alberta due to significant strikes affecting schools.
Looking ahead, Barnard expressed a cautious outlook, citing ongoing uncertainties in trade conditions that may hinder job growth in specific sectors in the near future.
Economists believe the Bank of Canada will weigh the new labor data along with forthcoming inflation and GDP figures before their upcoming interest rate announcement on December 10.
