Introduction to Canada’s Labor Market
Canada’s labor market has seen a significant surge in job gains, adding 60,000 jobs in September. This comes after two consecutive months of decline, with 66,400 jobs lost in August and 41,000 jobs lost in July. The September job gain is substantially better than the expected 22,500 jobs, according to FactSet consensus estimates.
Key Takeaways from the Report
The key takeaways from the report include:
- The labor market saw a spurt in job gains after back-to-back declines
- The unemployment rate remained unchanged but elevated at 7.1%
- The report eases the odds of an interest rate cut at the central bank’s meeting later this month
Labor Market Trends
The labor market appears to have shrugged off the ongoing trade war, despite the unemployment rate remaining unchanged at a stubbornly elevated rate of 7.1%. This rate has climbed by 0.5 percentage points since the start of the year, its highest level since May 2016, excluding the pandemic period. The strength in the labor market was driven primarily by gains in employment in manufacturing, health care and social assistance, and agriculture.
Impact on Interest Rates
The September jobs report has lowered expectations for a Bank of Canada interest rate cut. Following the report, market odds of a cut at the bank’s October meeting sank from 50% to 25%. Most observers agree that the economy isn’t out of the woods and that more interest rate cuts are needed to support growth.
Economist Commentary
Economists have weighed in on the September jobs report, with some suggesting that the data likely dampens the odds of an interest rate cut by the Bank of Canada at its next meeting. Others believe that the economy still isn’t strong enough to reduce the amount of labor market slack already present, and that further interest rate cuts are needed.
Declining Hours Worked Suggest Weak Economic Activity
Charles St-Arnaud, chief economist at Alberta Central, noted that the labor market in Canada may have started to stabilize, but one month of data does not create a trend. He believes that the Bank of Canada will cut its policy rate again this year, especially as its measures of core inflation are expected to ease further in the coming months.
September Report Tilts the Balance Toward an October Cut Pause
Doug Porter, chief economist at BMO Economics, stated that the strong report is certainly welcome after the big declines in the prior two months. He believes that the solid jobs figures lean toward a pause at the October meeting, unless the CPI report slows materially.
CPI Report Holds Key to Rate Cut
Andrew Grantham, senior economist at CIBC Economics, noted that the stronger-than-expected headline print and underlying details suggest that the Canadian labor market is stabilizing. However, he believes that the economy still isn’t strong enough to reduce the amount of labor market slack already present, and that further interest rate cuts are needed.
Conclusion
In conclusion, Canada’s labor market has seen a significant surge in job gains, but the unemployment rate remains elevated. The September jobs report has lowered expectations for a Bank of Canada interest rate cut, but economists believe that further rate cuts are needed to support growth. The upcoming CPI report will be closely watched to determine the Bank of Canada’s next move. Overall, the labor market trends suggest that the economy is still weak and that more support is needed to stimulate growth.
