The Canadian economy showed resilience in October as it created a robust number of jobs, more than recouping the positions that were lost during a summer lull.
Employment jumped by 108,000 in October, far exceeding the 10,000 that analysts expected, Statistics Canada said Friday in a report. Combined with a modest gain in September, the recent uptick has taken total employment to an all-time high. The unemployment rate held steady at 5.2 per cent, given that more people participated in the labour market last month.
Several analysts were encouraged by the underlying details: Job creation was entirely in full-positions and mostly in the private sector. Total hours worked rose 0.7 per cent, an early sign that economic growth will remain positive in the fourth quarter.
Compensation, meanwhile, picked up again. Average hourly wages grew 5.6 per cent over the past year, up from 5.2 per cent in September, for a fifth consecutive month above 5 per cent.
The acceleration in wages will likely draw the Bank of Canada’s attention. The central bank recently hinted that its campaign of outsized rate hikes is nearing an end. However, Friday’s report suggests labour demand is strong and employers are willing to pay up – a potential concern, to the extent that rising wages put more upward pressure on consumer prices.
The employment surge “makes a mockery of claims that the economy is on the cusp of recession and, with wage growth accelerating sharply despite favourable base effects, that means the Bank of Canada may need to raise interest rates by more than it has recently suggested,” Stephen Brown, senior Canada economist at Capital Economics, wrote to clients.
The Bank of Canada raised its policy rate by half a percentage point last week to 3.75 per cent, a surprising move to traders and private-sector economists, who expected a steeper hike of 75 basis points. (A basis point is 1/100th of a percentage point.) At the time, the central bank projected that economic growth would stagnate – and perhaps turn negative – soon.
“We expect growth will stall in the next few quarters – in other words, growth will be close to zero,” Governor Tiff Macklem said last week.
The federal government pointed to the possibility of recession in its fall economic statement, released on Thursday. It said there was a “downside scenario” in which inflation remains stubbornly high, forcing central bankers to raise interest rates even more, thereby sending the Canadian economy into a “mild recession” in the early stages of 2023. If that plays out, the unemployment rate would jump to nearly 7 per cent in the second half of 2023.
Still, those forecasts are far different from the picture of strength in Friday’s labour report. The unemployment rate, at 5.2 per cent, is near the lowest in nearly five decades of comparable data, while the number of people participating in the labour force jumped by 110,000.
Several industries enjoyed large gains, as well. Employment in construction rose by nearly 25,000. Manufacturing was up 23,800 and hospitality by 18,300. There were job increases in every province, paced by Ontario (43,000) and Quebec (28,000).
“This jobs report checked all the boxes in terms of being a blowout report,” Toronto-Dominion Bank economist Rishi Sondhi said in a report. “The Canadian labour market clearly still has some steam left to it.”
Comments
Post a Comment