Canada’s Labour Market Bounces Back in August

The Canadian labour market added 39.9k positions in August, with full-time employment up 32.2k and part-time employment up 7.8k.

The unemployment rate was unchanged at 5.5% and the participation rate dropped 0.1 percentage point to 65.5%.

Employment by sector exhibited the rubber band effect, with gains in professional, scientific and technical services (+52k) and construction (+34k) offsetting losses in prior months. Same for educational services (-44k), which had strong gains prior.

Lastly, total hours worked were up 0.5% month-on-month and wages were up 4.9% year-on-year (vs 5.0% in July).

Key Implications

The job market is keeping everyone guessing. While the positive job gain provided an offset to weakness in prior months, the population boom (+103k!) is causing labour force growth (+54k) to outpace hiring. The number of unemployed workers has now grown by 137.6k over 2023. As we highlighted in our recent job market outlook, there are many ways the once high-flying labour market can come back down to earth. So far, it has been a smooth transition. But this will be no easy task, and we expect turbulence in the months ahead.

Bank of Canada Governor Tiff Macklem spoke yesterday about the clear evidence that past interest rate hikes are working to slow the economy. While the evidence became a little less clear today, when we look under the surface, the story still holds. Consumer spending is slowing under the weight of 475bps in rate hikes over the last 18 months, and the real estate market is rolling over again after the BoC’s June/July rate hikes. Given that markets are pricing a 50/50 chance of another BoC hike this year, it is clear that market participants are still looking for more evidence of an economic slowdown.