Canada’s Labour Market Adds Jobs in February, Weak Underlying Details

The Canadian labour market added 40.7k positions in February, with full-time employment up 70.6k and part-time employment down 29.9k.

The unemployment rate increased 0.1 percentage point to 5.8% and the participation rate was flat at 65.3%.

Employment by industry showed gains in the service sector, with accommodation and food services (+26k) and professional, scientific, and technical services (+18k). Losses were seen in educational services (-17k) and manufacturing (-14k).

Lastly, total hours worked rose a trend-like 0.3% month-on-month and wages were down to 5.0% year-on-year (from 5.3% in January and 5.7% in December).

Key Implications

Nothing new from the Canadian labour market. Another decent gain in jobs, with weakness in the details. The boost to full-time jobs was nice to see, but this was all in public sector jobs and the notoriously volatile self-employment category. And as has been the case for 13 straight months, population growth (+83k) massively outstripped any gain in employment. As a result, the total number of unemployed people continues to rise (+220k since late 2022), causing the unemployment rate to rise again. Additionally, wage growth eased again, a trend that should continue now that the broad labour market has found greater balance.

The Bank of Canada has made it clear that it is not ready to cut rates yet. Today’s labour market report won’t sway this stance. While the job market has held in okay in spite of Canada’s meager pace of growth over the last year, the path of inflation is the deciding factor. And to date, the central bank believes it hasn’t seen enough evidence to move off the sidelines, although the slight easing in wage pressures may help. Looking at market pricing in the wake of today’s report, it is clear that markets aren’t swayed either, with odds of a June rate cut holding firm.