Canadian employment appears to be mirroring the moderating economy, official figures suggest
Canada’s latest labour market readings seem to be reflecting the moderating effects of elevated interest rates, with employment remaining “virtually unchanged” and unemployment levels remaining steady at 5.8%.
Statistics Canada reported that the number of employed Canadians aged 15 and older grew by 0.2% (74,000) last month, pushing up employment among core-age (age 25 to 54) men by 0.4% (25,000). Employment also increased by 1% among young women aged 15 to 24 (13,000).
Four provinces saw employment growth last month, with the largest increase seen in British Columbia (18,000, up by 0.6%). Meanwhile, Ontario saw a miniscule decline in December (-48,000, down by 0.6%).
StatCan said that total hours worked increased by 1.7% annually, spurred further by a 0.4% gain in December. Average hourly wages went up by 5.4% year over year (+$1.78 to $34.45), building up on a 4.8% upswing in November.
The Canadian economy is likely to see a moderate recession, stemming from rising debt service costs due to mortgage renewals, until mid-2024, according to a new analysis by Oxford Economics.
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 4, 2024
Read more: https://t.co/rPXRtrWE5w#mortgagenews #economicoutlook #recession #mortgage
What are the implications for the Bank of Canada’s policy?
Brendon Bernard, senior economist at jobs site Indeed, said that these latest results are steadily pushing the needle towards a BoC rate cut as early as the second quarter of 2024.
“The softening employment numbers and the rise in unemployment that we’ve seen over the past six or 12 months is moving things in the way of a cut,” Bernard said in an interview with BNN Bloomberg.
“To come in basically flat, it’s not a great sign. It didn’t show up in the unemployment rate, which held steady, but that just reflects the fact that the labour force participation declined, so taking that all into account, the share of the population with a job declined.”
On the other hand, Dominion Lending Centres (DLCG) chief economist Sherry Cooper said that the December labour numbers represent “a mixed bag” that could delay potential downward adjustments to the rate.
“The next Bank of Canada confab is on January 24, before which we will see the December inflation data on January 16,” Cooper said. “Given the mixed labour force survey, particularly the wage spike, the Bank of Canada will remain cautious. They will wait until inflation is sustained meaningfully below 3% before cutting the overnight policy rate for the first time this cycle.”
