Canada’s labor market beat expectations with jobs gains, but a rising unemployment rate and a drop in hours worked show mounting economic weakness — especially in the finance and real estate sectors.
The country added 25,000 jobs in November, while the unemployment rate rose 0.1 percentage points to 5.8%, the highest since January 2022, Statistics Canada reported Friday in Ottawa. The jobs figures topped expectations for a gain of 14,000 positions but matched the expected jobless rate, according to the median estimate in a Bloomberg survey of economists.
Employment in the finance, insurance and real estate sectors fell by 18,000 in November. Since July, the number of jobs in those industries has declined by 63,000, the steepest decrease of any category over the period. Canada’s major banks have been trimming staff; Toronto-Dominion Bank was the latest to announce this week it would cull thousands of positions this year and next.
Bonds fell and the loonie rose. The yield on the Canada 2-year benchmark note was 4.227% as of 9:26 a.m. Ottawa time, an increase of about 5 basis points from its level prior to the data release. The Canadian dollar was up about 0.3% on the day to C$1.3520 per US dollar.
Total hours worked fell 0.7% on a monthly basis, and were up 1.3% from a year ago. It was the biggest monthly decline since April 2022, confirming weak economic momentum in the middle of the fourth quarter and also shows that higher interest rates are already cutting into hours and employment in rate-sensitive sectors.
“These numbers suggest the economy entered the holiday season on soft footing,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a report to investors. “As the lagged impacts of rate hikes continue to make their way through the economy, we expect further labor market weakness will drag down underlying inflationary pressures in the months to come. That should set the Bank of Canada up to begin trimming rates in the second quarter of next year.”
The pace of hiring is stuck below the population-driven expansion of the labor force. “We have to remember that 25,000 isn’t what it used to be,” Brendon Bernard, senior economist at Indeed, said on BNN Bloomberg Television. The working-age population grew by about 78,000 during the month, “so in that context, things are actually lagging.”
Wage growth for permanent employees held steady at 5%, slightly faster than expectations for a 4.9% rise. That’s the fifth straight month where the pace has been stuck at or above 5%, which are levels Bank of Canada Governor Tiff Macklem has said are inconsistent with a timely return to the 2% inflation target. Excess demand is gone and the economy is expected to remain weak for the next few quarters, the governor has said, which should help slow the pace of price increases.
The report came a day after gross domestic product data showed the economy unexpectedly contracted in the third quarter and consumption flatlined. Third-quarter GDP fell at a 1.1% annualized pace, nearly wiping out all the growth in the previous quarter.
The jobs data is the last key input for policymakers before the next rate decision on Dec. 6. The majority of the forecasters in a Bloomberg survey expect the central bank will keep rates unchanged for a third straight meeting and hold them at 5%, a likely end point in this tightening cycle. Markets and economists expect policymakers to start cutting rates in the first half of next year.
Ontario Cities Suffer
The participation rate held steady at 65.6% in November.
The employment rate — the proportion of the working-age population that’s employed — fell 0.1 percentage points to 61.8%. The employment rate has decreased in four of the past five months, and has generally trended down since January, when it reached a recent high of 62.5%.
The unemployment rate has risen 0.8 percentage points since April. Compared with a year ago, unemployed people in November were more likely to have been laid off from their previous job, reflecting more difficult economic and labor market conditions, the statistics agency said.
Job gains in November were led by increases in manufacturing and construction. Regionally, employment rose in New Brunswick, while it fell in Prince Edward Island and was little changed in all other provinces.
Among Canada’s largest population centers, the unemployment rate was highest in Windsor, St. Catharines-Niagara and Oshawa — all in Ontario. St. Catharines-Niagara and Oshawa also recorded the largest unemployment rate increases from April to November.
Wholesale and retail trade shed 27,000 jobs last month, and employment in the industry was at its lowest since in December last year.
--With assistance from Erik Hertzberg.
(Updates with market reaction, more details and economist comments.)
Author: Randy Thanthong-Knight
