In a stunning turnaround, Canada added 108,000 jobs in October, reversing all the losses from May to September.
The outsize gain and the resilience of the job market suggest that the Bank of Canada will announce another supersize interest rate hike next month.
Wages increased by a robust 5.6% and might not stop there. Public service employees across the nation are going on strike and demanding the largest wage gains in years to cope with inflation.
This means that short-, and possibly medium-term inflation expectations, are rising. Once inflation expectations become entrenched, the Bank of Canada’s efforts to restore price stability grow much harder.
The unemployment rate remained steady at 5.2%, with most of the gains coming among core-aged population.
The labour force participation rate rose by 0.2 percentage points to 64.9%, driven by employment among immigrants, which is at an all-time high and is providing much-needed relief in a tight market.
But this will have to continue and be paired with automation and technological advancement to help the economy grow not only next year but in the long run.
October’s jobs report was the strongest in months, with gains in employment observed among full-time workers (119,000); in both the goods-producing sector (45,100) and the services-producing sector (63,200); and broadly across industries and provinces.
Construction (24,600) and manufacturing (23,800) saw gains that offset the decline in the summer, signaling an economy that is going strong despite a slowdown in the real estate market and in global demand for manufactured goods.
Even though parts of Europe are already in a recession, global and domestic demand seems strong enough to keep Canadian manufacturers hiring.
Jobs in professional services continued to increase, adding 17,900 positions. This is one sector that has been steadily growing throughout the pandemic and is showing little signs of a slowdown.
The accommodation and food services sector added another 18,300 jobs. Even though the high season of summer travel is over, in-person events and gatherings are very much here to stay. Demand for jobs in this sector shows that services spending could stay strong at least through the holiday season.
Amid persistent inflation and a tight labour market, the Bank of Canada might need to implement a larger rate hike in December and hold at well above 4%. This will most likely push the country into a recession in the first half of next year.
In the meantime, businesses will see higher costs both from inflation and from the labour supply crunch, and workers will lose purchasing power as inflation outpaces wage gains. These are not conditions favoured by anyone but are needed to ease inflation.