After a solid start to 2024, the labor market weakened in March. The unemployment rate rose to 6.1%, its highest level since November 2021, indicating a growing level of slack in the economy.
Rather than the expected gain of 25,000 jobs, the economy shed 2,200 jobs in March. The jump in the unemployment rate – from 5.8% in February – was attributed to historically high population growth that saw an additional 60,000 people looking for work in March, according to Statistics Canada. The employment rate, representing the share of the population working, moved lower to 61.4% from 61.5%, as population growth outpaced employment growth.
Job losses were observed in both full-time (-700) and part-time (-1,600) positions. The decline was primarily in self-employed roles (-29,300), while both the private (+15,200) and public (+11,900) sectors experienced gains. Over the past year, job creation has been stronger in the public sector (+202,100) than the private sector (+141,300).
The decline in employment was predominantly in the service sector (-32,000), while the goods-producing sector saw widespread gains (+29,900), except for agriculture (-2,500). Increased employment was seen in construction (15,300), manufacturing (+9,300), and utilities (+4,300).
Several service industries experienced significant job losses, particularly accommodation and food services (-26,600), as well as retail and wholesale trade (-23,100), indicating weak discretionary spending. The rest of the service sector was up marginally, with losses in professional, scientific, and technical (-19.900) and information, culture, and recreation (-10,000) offset by gains in health care (+39,900), finance, insurance, and real estate (+11,000), and education (+9,400).
Wage growth for permanent workers increased to 5.0% year-over-year from 4.9%, exceeding levels supported by productivity growth and catch-up in purchasing power. However, the three-month annualized change in seasonally-adjusted wages eased to 2.4%, signaling a potential slowdown in the coming months. Additionally, various wage measures declined in March, indicating that the accumulated slack in the labor market is beginning to restrict wage growth.
Although wage growth continues to outpace productivity gains, its recent moderation is welcome news for the Bank of Canada. However, the weak employment report for March is unlikely to prompt an earlier-than-expected rate cut. Previous statements from the Bank suggest that inflation, particularly core inflation measures and the breadth of inflationary pressures, will determine the timing of the first move.
We expect the Bank of Canada will wait for core inflation and its momentum to fall sustainably below 3% before considering a rate cut. We expect this will occur around April or May, paving the way for a potential rate cut at the June meeting. In the meantime, it’s worth observing whether, despite strong GDP, the Bank of Canada adopts a more dovish tone at this week’s policy meeting.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
Despite playing a crucial role in maintaining stability and accessibility within Canada’s housing market, CMHC has shown limited innovation over the past fifteen years to enhance the efficiency of the housing finance system. The March 27th edition of CMI’s Housing Affordability Watch highlighted various potential initiatives that CMHC could explore to improve efficiency and help restore affordability to Canada’s housing market. Over the next few weeks, we’ll delve into each of these options in detail. In the first instalment of our series, we examine the US mortgage-backed securities (MBS) market to identify best practices that could be applied to Canada’s National Housing Act Mortgage-Backed Securities (NHA-MBS) program. Read it here: Improving Efficiency in the NHA MBS Market – Lessons from the US
Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any person or organization in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice including investment advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication. Readers are cautioned to always seek independent professional advice from a qualified professional before making any investment decisions.
