Canada’s job market shows little sign of slowing

Canada’s economy in September reversed the slowing labour market of the summer, adding 21,100 jobs while unemployment fell to 5.2%, according to government data released Friday. Employment among women in their prime working age grew for the first time since May as children headed back to school, allowing for mothers to return to full-time work. Gains in employment came mainly from the services sector (45,900), while the goods-producing sector lost jobs (24,800). Most losses were from manufacturing (27,500); transportation and warehousing (18,200); and information, culture and recreation (21,500) Gains in employment were from educational services (46,000), reversing the decline in August as people headed back to school. Similarly, health care gained 23,800 jobs. While this is not enough to offset the recent exodus of health care workers and is far from enough to remedy the shortage, this is a much-needed addition. Manufacturing, on the other hand, offers clear evidence of a slowing economy with the second consecutive month of job losses. Manufacturing is one sector where sluggish global demand and an impending global recession can most clearly be seen, even though domestic demand remains solid. It does not help that the labour force participation rate fell another 0.1 percentage points to 64.7%. Canada’s aging population, with large numbers of baby boomers retiring, will continue to put pressure on labour supply.

The takeaway

With wage growth well above 5% and job vacancies still high, all data points to a tight labour market. There is little doubt that the Bank of Canada will continue its interest rate hikes to restore price stability. We expect a 50 basis-point increase in October and another hike in December, bringing the policy rate above 4% by the end of the year.