The Canadian labour market showed resilience as it added a better-than-expected 64,000 jobs in September, primarily driven by part-time employment. Despite the promising figures, experts caution that the job market’s strength might be overestimated.
Statistics Canada’s recent labour force survey highlighted that the unemployment rate remained unchanged at 5.5% for the third consecutive month. However, a deeper dive into the numbers reveals a nuanced picture. A significant portion of the employment gains can be attributed to seasonal spikes in the education sector.
James Orlando, TD director of economics, noted, “While the headline figures will be grabbing most of the attention, we’d caution on getting too excited. Almost all the gains were in the historically volatile education sector. Furthermore, most of the job gains were in part-time employment, causing the number of hours worked to decline. These details should throw some cold water on a seemingly hot jobs report.”
This surge in jobs comes as Canada experiences strong population growth, with more people entering the labour force. However, the nation’s labour market has faced challenges, particularly with rising interest rates over the past year. As a backdrop to the current figures, the unemployment rate stood at an average of 5.7% in 2019, before the pandemic disrupted economic patterns.
Despite the positive numbers, some sectors experienced job losses. Employment in finance, insurance, real estate rental and leasing, information and recreation, and construction took a hit. In contrast, areas like educational services and transportation and warehousing saw an uptick in job numbers.
One key factor impacting the economy has been the Bank of Canada’s interest rate hikes since March 2022. These changes have begun to manifest in the slowing economic growth and declining job vacancies. The central bank’s key interest rate has reached five per cent, a peak not seen since 2001. Such high rates are anticipated to further strain the economy, potentially curbing businesses’ enthusiasm for hiring.
On the brighter side, wage growth this year has surpassed inflation, compensating for prior setbacks due to price growth. September’s average hourly wages showed a 5% increase year-on-year, while August reported an inflation rate of 4%. Economists often regard wage growth as a delayed reflection of economic health, particularly since workers generally seek higher wages to balance out previous hikes in living costs.
On a provincial level, Canada’s national unemployment rate for September provides a mixed bag of results. Quebec enjoyed the lowest rate at 4.4%, whereas Newfoundland and Labrador topped the chart with a 9.7% unemployment rate.
The intricate dance between job creation, inflation, and interest rates will undoubtedly remain a focal point for analysts and policymakers alike as Canada navigates its economic recovery.