March 14, 2024
Canada’s labor market surged past expectations with the biggest job gains since September, but a rising unemployment rate and slowing wage growth still point to easing inflation pressures ahead. The country added 41,000 jobs in February, while the unemployment rate rose to 5.8%, Statistics Canada reported Friday in Ottawa.
The employment figure more than doubled expectations and the jobless rate matched the median estimate in a Bloomberg survey of economists. Wage growth for permanent employees decelerated to 4.9%, lower than expectations for a 5.1% rise, and down from 5.3% a month earlier. That’s the weakest pace of wage increases since June. The Canadian numbers were released at the same time as US figures which also showed a better-than-expected increase in payrolls and a rising unemployment rate. Markets fluctuated in response to the data — the loonie strengthened in the minutes after the releases before reversing course, while the Canada two-year benchmark yield fell about 5 basis points on the day to about 4.039%.
The job gains were driven by a rise in self-employed positions, up 38,300, and public-sector roles, which increased by 18,800. The private sector lost jobs, shedding 16,400 positions. Still, there’s little in the jobs data that would force the Bank of Canada to urgently consider cutting rates — policymakers can continue to wait until they’re convinced that inflation is on a sustained downward path to the 2% target. “There is still evidence from today’s data that labor market conditions are loosening, but only very gradually and not in a way that demands an imminent reduction in interest rates,” Andrew Grantham, an economist at Canadian Imperial Bank of Commerce, said in a report to investors. “We continue to forecast a first reduction at the June meeting.”
On Wednesday, Governor Tiff Macklem and his officials held policy rates steady at 5% for a fifth straight meeting, acknowledging progress on inflation while reiterating that it’s “too early” to consider easing. Macklem said there were signs wage pressures may be easing as labor markets have continued to loosen gradually. This is the first of two job reports before the next Bank of Canada rate decision on April 10, when policymakers will also update their forecasts. Economists in a Bloomberg survey see the bank holding policy rates at 5% for a sixth straight meeting, and many of them expect the easing cycle to start at the following June meeting.
“Today’s data on both sides of the border was a really good case study in a soft-landing data point,” Christine Tan, portfolio manager at SLGI Asset Management Inc., said on BNN Bloomberg Television. “Top line hotter than expected, and in Canada a lot of it came in full-time jobs versus part-time. But the wages side is going in the right direction.” The February employment data is consistent with the overall economy growing early in 2024, but still not fast enough to keep up with population growth, Nathan Janzen, assistant chief economist at Royal Bank of Canada, said in a report to investors. The unemployment rate is still expected to edge higher in the first half of the year against slowing per-capita GDP, he added.
“We continue to expect the combination of a softening economic backdrop and slowing inflation pressures will allow the BoC to pivot to gradual interest rate cuts starting in June,” Janzen said. Total hours worked in February rose 1.3% from a year ago and were up 0.3% in the month. The unemployment rate increased 0.1 percentage points to 5.8%, which is where it has been for three of the past four months.
The participation rate held steady at 65.3%. Population growth due to high levels of immigration continued to outpace employment gains in Canada. That’s reflected in the employment rate — the proportion of the working-age population that’s employed — which fell 0.1 percentage points to 61.5%. That’s the fifth straight monthly decline and the longest streak of decreases since 2009. Job gains were spread across services-producing industries, led by accommodation and food services, professional and technical services and public administration.
Over a one-year period to February, employment for public-sector employees grew 4.7%, faster than 1.2% for private-sector employees. Regionally, nearly half of the job gains were in Alberta, led by construction as well as wholesale and retail trade. Nova Scotia also added jobs, while employment fell in Manitoba and was little changed in other provinces.
