Highlights:
- Employment rose 10k in September as massive swings in full-time (+112k) and part-time (-102k) largely offset one another.
- The unemployment rate held steady at 6.2%. Aside from a two-year period prior to the 2008-09 recession, when the economy was running beyond full capacity, unemployment hasn’t been this low in decades.
- Wage growth picked up to 2.2%, the highest pace in more than a year, from a low of 0.5% in April. September’s increase was in goods-producing jobs, led by an gain in construction sector employment.
- Services employment was flat as a jump in education services, likely reflecting shifting hiring patterns for teachers, was offset by a pullback in culture and recreation employment.
- A more moderate pace of job growth in Q3 – with average monthly gains of 14k compared with 31k over the first half of the year – is consistent with our forecast that GDP growth shifted down to a still above trend 2.5% annualized rate in the quarter.
Our Take:
Canada posted a tenth consecutive job gain in September, extending the best streak in nearly a decade. But the bigger story in today’s employment report is that wages are finally starting to pick up after a period of puzzlingly slow growth. Average hourly wages were up 2.2% from a year ago, largely due to acceleration in the last few months. It appears tight labour market conditions, including a near-decade-low unemployment rate and limited ‘hidden’ slack, are finally having an effect. Faster wage growth, which should eventually feed through to higher prices, supports the Bank of Canada’s expectation that inflation will return to its 2% target over the next year. After a more dovish speech by Governor Poloz last week trimmed the odds of another rate hike this year, we think today’s report supports our forecast that the overnight rate will be raised once more in 2017.
