Canada’s economy in October continued the trend of a weak labour market, adding only 15,000 jobs.
Although the unemployment rate remained unchanged at 6.5 per cent, this has been because of people dropping out or staying out of the workforce, as the labour force participation rate fell to 64.8 per cent, the lowest since December 1997.
While we expect the Bank of Canada’s 50 basis-point rate cut in October to stimulate the market somewhat, the central bank’s policy rate remains restrictive. A measurable uptick in hiring will come only early next year.
The Bank of Canada will most likely continue cutting rates at every upcoming meeting, including a 25 basis-point cut in December, until it reaches the terminal rate of 2.75% next year.
The labour force participation rate among youths, at 62.3% per cent, has been falling amid a lackluster hiring environment, steering younger workers to pursue education rather than entering the workforce.
But layoffs have also been rare, which is why the participation rate among core-age workers remains comparable to the pre-pandemic years of 2017 to 2019.
The participation rate of core-age men fell by 0.3 percentage points to 91.4 per cent, and that of core-age women fell to 84.9 per cent.
Read more of RSM Canada’s insights into the economy and the middle market.
Wage growth climbed back to 4.9 per cent, following the 4.6 per cent growth on a year-over-year basis in September. The weak job market could ease wage growth in the upcoming months.
But with population growth expected to slow next year, it is likely that medium-term wage growth will remain elevated compared to the pre-pandemic era.
While elevated wage growth poses a slight risk for inflation, the disinflationary pressures will most likely be sufficient to keep inflation around the Bank of Canada’s target of 2 per cent.
Business hiring was muted after two strong months, indicating that businesses are most likely awaiting further rate cuts. Public sector employment also remained unchanged.
Employment rose by 25,000 among male youths and by 33,000 among all youths. Youths are likely to be new entrants to the workforce, and the uptick in youth employment sends a positive sign that hiring might be starting again.
Business, building and support services had the biggest gains in October’s employment report, adding 28,700 jobs, followed by information, culture and recreation at 12,200 jobs, educational services at 11,600 jobs and manufacturing at 9,700 jobs.
Finance, insurance, real estate and leasing shed 13,000 jobs, but the industry added 50,000 jobs on a year-over-year basis, outpacing employment growth across all industries.
