The Canadian jobs market has followed a sawtooth pattern this year, with soft months followed by an uptick. This trend continued through the summer, with August job gains coming on the heels of losses in July. While the most recent data suggests a slight rebound in the labour market, the gains are not strong enough for the Bank of Canada to rethink its position on monetary policy. Importantly, Statistics Canada has noted that with the steady growth in population, 50,000 new jobs a month are required to keep the unemployment rate unchanged.
We believe that the Bank will leave its policy rate unchanged for the rest of the year to allow the full impact of past rate increases to take effect. Historically, after monetary policy becomes restrictive, a downturn follows within five to seven months. In Canada, monetary policy did not become restrictive until late 2022/early 2023.
August Employment Numbers
Despite adding nearly 40,000 jobs in August – double the consensus expectation from economists – the unemployment rate remained unchanged at 5.5%, mainly due to a small decline in the participation rate from 65.6% to 65.5%. The employment rate, or the share of the population that was working, decreased to 61.9% as population growth outstripped employment gains. While the August report was solid, the fact that self-employment drove job gains (49,500 jobs) is a potential concern.
The job-changing rate, which represents the percentage of workers who switch jobs between months, was 0.4% in August – half the rate observed in early 2022 when job vacancies were high, and below the pre-COVID rate of 0.7%. This softening in the job market will ease wage pressures, although wage growth remains near the high end of the Bank’s comfort zone at 4.9% (on an annual basis).
At an industry level, employment gains were mostly in the service sector (+42,400), while the goods-producing sector saw a slight decline (-2,500), with job losses in manufacturing (-29,500) and agriculture (-10,500) partially offset by gains in construction (+33,800) and natural resource extraction (+5,300). Construction had been notably weaker prior to the August increase. The sector is up only 0.8% year-over-year compared to an increase in total employment of 2.5% year-over-year.
Regionally, Quebec is showing the lowest jobless rate at 4.3%, while provinces to the West are in the 5% range. To the East, the Maritime provinces are in the 7% range with Newfoundland at 8.9%.
Independent Opinion
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