A look at August’s job report reveals clear signs of a soft landing.
Canada added 40,000 jobs, smashing expectations, and offset the modest loss in July many times over. The unemployment rate was unchanged at 5.5%, according to data released on Friday by Statistics Canada.
Immigration has played a vital part in keeping the economy buoyant as job growth was led by population growth.
Wage growth reached 4.9%, barely budging from previous month’s 5% gain and clearly still too high for the Bank of Canada. Wage growth has now outpaced inflation, resulting in increased purchasing power for households.
Yet a third of workers who held multiple jobs did so to pay for essential needs. A tale of two groups of workers emerges to send a somber reminder that even in a soft landing, the cost-of-living crisis must not be ignored.
The Bank will monitor wage growth and unemployment, among other data, in the upcoming months to determine whether the economy sufficiently cools, but a peak rate of 5% is still the most likely outcome.
Job growth was led by an impressive 52,100 gains in the professional, scientific, and technical services industries, which speaks to the strength of the services sector.
Construction added 33,000 jobs, and any growth in construction is welcome given the critical housing shortage.
The most prominent loss was in educational services, which had 44,200 fewer jobs. Some of that loss could be reversed in September when school is back in season.
Manufacturing also lost 29,500 jobs, signaling another industry experiencing slowdown.
Employment rose among both core-aged men (33,000) and women (21,000), while employment decreased among older workers, presumably as more boomers entered retirement.
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The gains in employment were outpaced by population growth as the employment rate fell slightly by 0.1%. In the upcoming months, as hiring slows, population growth might continue to outpace job growth, leading to an increase in the unemployment rate.
Despite the gains, there is evidence of softening labour demand. Involuntary part-time employment climbed from 17.2% in July to 18.9% in August, and the increase is even more pronounced among youth. This indicates that some younger workers would have liked to find full-time employment but were unable; thus, they had to work part-time.
Furthermore, job switches have fizzled and workers might have more difficulty finding new work compared to last year at the height of the Great Reshuffle.
In the months ahead, hiring could slow as businesses find it challenging to borrow in a high-interest rate environment. That said, population growth from immigration means employment will likely keep growing. The economy looks to be on solid ground and employers will hold on to the workers they have.