Canada recorded an eleventh straight month of job gains as 35.3k net new positions were added in October. The unemployment rate ticked up a touch to 6.3% after holding at 6.2% for two months, as more people entered the labour force.
Full-time jobs dominated gains in the month, adding 88.7k jobs. However, about 53.4k part-time jobs were shed in the month, the second consecutive month of part-time job losses. The private sector added 39k jobs in October, while there was little change in public sector employment. Self-employment was little changed in the month.
Jobs in good-producing industries led the gain, adding 33.9k positions, driven largely by construction (+18.4k), and a notable uptick in manufacturing (+7.8k). The services side of the economy remained subdued for the second consecutive month (+1.4k), as healthy gains in sectors such as other services (+21.4k) and information culture and recreation (+15.3k) were largely offset by a large decline in trade (-35.9k). Statistics Canada notes that “Other Services” includes services related to civic and professional organizations, and personal and laundry services.
Regionally, Quebec recorded strongest job gain (+18k), adding net 33k full-time jobs while part-time jobs fell back 15k. Job gains elsewhere were less robust, with net increases recorded everywhere except Ontario and British Columbia; both provinces saw employment little changed in October.
Growth in both hourly wages and hours worked accelerated in October. The headline hourly wage rate accelerated further, to 2.4% on a year-on-year basis, while hours worked rose 2.7% y/y, albeit from a weak base, with the month-on-month increase much more modest.
Key Implications
Overall, October was a strong report, with robust full-time job gains, a slight uptick in the participation rate, and acceleration in hourly wage growth and growth in hours worked. This morning’s data extends the streak of job gains to 11-months.
Hourly wage growth is likely to raise some eyebrows at the Bank of Canada, holding above 2% for the second consecutive month and even accelerating a touch. With Governor Poloz emphasizing labour market developments as a key indicator of capacity pressures in last week’s interest rate announcement, the persistent move back up to over 2.0% growth in wages will be viewed as confirmation that economic slack has largely diminished.
Broader measures of labour market slack have improved so far this year. For example, the unemployment rate measure including discouraged searchers, and involuntary part-timers (R8) has trended down sufficiently such that it’s only a touch elevated relative to the pre-crisis trough. Moreover, there has been some progress on the share of discouraged workers who are not part of the labour force but want to work. On the other hand, youth employment participation rates remain stubbornly below pre-crisis levels, and it remains unclear if this trend can be fully attributed to students focusing on studies.
The Canadian labour market remains consistent with a view that the Canadian economy is operating at or very near to capacity. As such, we reiterate what we said last week after the Bank of Canada decision. The economy is in something of a sweet spot, as economic slack is gradually giving way to rising capacity pressures and growth evolving back towards its longer-term trend. But, inflation remains relatively subdued with some evidence that wage growth is persistently ticking upward, and housing and trade risks help skew risks toward the downside. Altogether, this removes any immediate urgency to raise interest rates from current levels, but more signs of rising capacity pressures will eventually lead to another rate hike as early as January 2018.
