No more rate hikes expected as unemployment rate rises to 21-month high
Canada’s unemployment rate ticked up two basis points to 5.7% in October, suggesting the Bank of Canada can now remain “firmly on the sidelines,” economists say.
The rise in the nation’s unemployment rate came even as 17,500 new positions were created, according to the latest figures from Statistics Canada. That comprised a decrease of 3,300 full-time positions and a rise of 20,800 part-time positions.
“But with Canada’s population growing at breakneck speed—the labour force is now growing at well over 50,000 people per month—such a job gain is simply not enough,” noted BMO’s Douglas Porter.
Breaking down the results by industry, construction saw the largest increase in employment at +23,000 positions. This follows previous months of sluggishness seen in the sector, Porter noted. Gains were also seen in information, culture and recreation (+21,000).
The gains were offset by declines in more economically sensitive sectors, including wholesale and retail trade (-21,700), manufacturing (-18,800) and finance and real estate (-8,100).
Regionally, Alberta continued to see employment grow, adding another 37,700 positions in the month. But, like the situation nationally, the gain wasn’t enough to offset the rise in population growth, resulting in the unemployment rate ticking up to 5.8%.
Both Quebec and Ontario saw a decline in employment with declines of 22,100 and 14,300, respectively. In Quebec’s case, that caused the unemployment rate to jump 5 basis points to 4.9%.
StatCan also released data on average hourly wages, which rose 4.8% on an annual basis (+$1.56 to $34.08). That’s down from a rate of 5.0% in September.
Today’s data suggest no more rate hikes
The October employment data have solidified economists’ calls that no further interest rate hikes are likely.
Economists from Desjardins said the Bank of Canada can now remain “firmly on the sidelines.”
“The still-tight labour market is showing signs of easing, and Canadian consumers and businesses still haven’t felt the full effects of prior borrowing cost increases,” they wrote. “We remain of the view that the Bank of Canada’s next move will be a cut in the second quarter of 2024.”
James Orlando of TD Economics agrees, noting that “cyclically sensitive private sector hiring” has now been declining for months.
“Given the rise in the unemployment rate and continued weakening in the underlying details, today’s report is likely to make the BoC feel more comfortable about its decision [last month] to hold,” he wrote. “Looking forward, we are expecting this employment trend to continue, while high rates and persistent inflation make the case for the BoC to remain on hold in December.”