Canada’s Labour Market Posts Modest Gain in October

The Canadian labour market added 17.5k positions in October, with full-time employment down 3.3k and part-time employment up 20.8k.

The unemployment rate rose 0.2 percentage points to 5.7% and the participation rate was unchanged at 65.6%.

Employment by sector showed gains in construction (+23k) and information, culture and recreation (+21) being offset by declines in wholesale and retail trade (-22k) and manufacturing (-19k).

Lastly, total hours worked were flat at 0.02% month-on-month and wages were up 4.8% year-on-year (versus 5.0% in September).

Key Implications

The Canadian jobs market is moving back towards balance following two strong monthly prints. The 18k monthly job gain once again failed to keep up with the 58k gain in the population-driven boost to the labour force. The “is this a recession?” debate will continue to swirl, with the unemployment rate rising by 0.7 percentage points since April. While this certainly isn’t a recession as there is no depth, duration, or breadth, weakness is present. The number of unemployed workers keeps rising, while cyclically sensitive private sector hiring has been retreating for months.

When the Bank of Canada decided to hold rates at 5% last week, it did so because of a notable slowing in economic momentum. While this has been apparent in reduced consumer spending and a weakening housing market, the labour market left the BoC wanting more. But, 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 to hold. 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.