The Canadian economy added jobs at a slower pace in October and the unemployment rate rose, the latest sign of how higher interest rates are weighing on economic activity.
The labor market added 17,500 jobs last month, after gains of nearly 64,000 in September and 40,000 in August, Statistics Canada said in a report Friday. Analysts on Bay Street had expected a gain of 25,000 roles in October.
Despite the increase, the unemployment rate rose to 5.7 percent from 5.5 percent, the highest level since January, 2022. The labor force is expanding rapidly due to the immigration boom, but employers are not creating enough jobs to keep the unemployment rate up. From the rise.
Meanwhile, average hourly wages rose 4.8 percent on a year-over-year basis in October — down from a 5 percent pace in September. It’s an encouraging sign for the Bank of Canada, which has repeatedly flagged elevated wage growth as a risk to the inflation outlook.
Economic data has been undeniably softening in recent months: GDP has stagnated, job vacancies have fallen and consumers are pulling back on buying as businesses and households struggle with borrowing rates higher than in more than two decades.
After Friday’s report, analysts said the Bank of Canada was unlikely to raise its benchmark interest rate further from its current 5 percent.
„While headline job gains have been uneven, there is no mistaking that the underlying picture for Canada’s labor market is softening. Exhibit A on that front is a grinding increase in the unemployment rate,” Bank of Montreal chief economist Doug Porter wrote to clients.
He added: „This would leave the Bank of Canada more fully on the sidelines, although we still believe rate relief remains a remote possibility.”
The labor report showed mixed results by region and industry. Alberta added 37,700 positions in October, the most of any province. At the other end, employment fell by 22,100 in Quebec and 14,300 in Ontario. Due to Quebec’s weakness, Saskatchewan now has the lowest unemployment in the country at 4.4 per cent.
Construction added 23,000 jobs, the most by any industry. Manufacturing lost 18,800 shares, while wholesale and retail lost 21,700 positions.
The unemployment rate remains high after reaching 4.9 percent last year. The figures indicated there were 1.2 million unemployed people in October, an increase of 171,000 from April. 60 percent of those unemployed in September remained unemployed in October, a higher rate than a year ago.
The report said this was „an indication that job seekers are having more difficulties finding work than they were a year ago”.
In October, one in three Canadians aged 15 and over lived in a household where it was difficult or very difficult to meet their financial needs for necessary expenses in the past four weeks, Statscon reported Friday. This rate is down slightly from a year ago (35.5 percent), but still higher than three years ago (20.4 percent).
The annual inflation rate has eased to 3.8 percent from last year’s peak of 8.1 percent. However, the Bank of Canada doesn’t expect inflation to return to its 2-percent target until mid-2025. Also, the cost of basic necessities such as food and shelter continues to rise.
From a labor perspective, the coming months could be challenging for job seekers.
„Given the current weak trend in economic activity and its implications for labor demand, job growth will lag overall population this year and through 2024,” said Andrew Grantham, senior economist at CIBC Capital markets, in a report.
The unemployment rate could rise further and peak somewhere between 6 percent and 6.5 percent, Mr. Grantham said. „This will help ease wage and overall inflationary pressures, allowing interest rate cuts to begin in the second quarter of 2024,” he said.
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