Canada’s labor market blew past expectations and wages rose at a faster rate, signaling there’s still some gas left in the jobs machine even as the economy gears down.
(Bloomberg) — Canada’s labor market blew past expectations and wages rose at a faster rate, signaling there’s still some gas left in the jobs machine even as the economy gears down.
The country added 40,000 jobs in August, while the unemployment rate held steady at 5.5% following three straight monthly increases, Statistics Canada reported Friday in Ottawa. The figures beat expectations for a gain of 20,000 positions and a jobless rate of 5.6%, according to the median estimate in a Bloomberg survey.
Rising employee pay reflects some remaining tightness in the labor market, with wage growth for permanent employees accelerating to 5.2%, beating expectations for a 4.7% rise. A month earlier, wages were up 5%.
The Canadian dollar extended gains and Canada 2-year yields jumped to fresh session highs above 4.65% after the report. The loonie traded 0.5% stronger at C$1.362 to the US dollar, outperforming many peers in the Group of 10 currencies.
Still, the data suggest the jobs market is looser than it was last year. Population growth outpaced the increase in employment in August and the employment rate fell 0.1 percentage point to 61.9%. That’s the seventh straight month this year that population growth outpaced job gains.
Since January, employment has increased by 25,000 on average per month, while the population aged 15 and older grew by 81,000. Given this pace of population growth, monthly job gains of about 50,000 per month are required for the employment rate to stay constant.
Read More: Canada’s Macklem Says Victory Over Inflation Is ‘In Sight’
The August data shows an economy that’s still churning out jobs even amid higher interest rates, albeit at a slower pace than its potential given the backdrop of record-high population growth. Governor Tiff Macklem and his officials held borrowing costs at 5% on Wednesday, saying recent evidence suggests excess demand in the economy is easing. But wage growth remains a key concern.
Last month, total hours worked rose 0.5% on a monthly basis, the fastest pace since February, and were up 2.6% compared to a year earlier. That points to relatively strong economic momentum in the middle of the third quarter, when economists surveyed by Bloomberg expect gross domestic product to expand 0.7%. Last week, preliminary data suggested gross domestic product was flat in July.
“This report alone won’t make the Bank of Canada regret holding rates steady earlier this week,” Royce Mendes, head of macro strategy at Desjardins, said in a note to investors. “However, it does highlight that the economy hasn’t completely stalled.”
This is the first of two jobs reports before the next rate decision on Oct. 25. The majority of economists in a Bloomberg survey currently expect the bank to hold rates steady, and many see the bank already reaching its terminal point for rates this tightening cycle.
The involuntary part-time employment rate — another indicator of the balance between job supply and demand — was 18.9% in August, up from 17.2% a year earlier. That signals an easing of labor market demand.
Job gains were led by increases in professional and technical services, and construction. Some of the biggest decreases were in education services, manufacturing, and finance and real estate.
Employment rose in Alberta, British Columbia and Prince Edward Island, while it fell in Nova Scotia and was little changed in other provinces.
In Ontario, the population aged 15 and older grew by 45,000, accounting for nearly half of total population growth in the country. With little change in employment and an increase in the size of working-age population, the employment rate in the province fell 0.3 percentage points to 61.7%.
–With assistance from Erik Hertzberg, Anya Andrianova and Derek Decloet.
(Updates market reaction, adds comment from Desjardins economist in)
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