Canadian labour market shows no signs of slowing despite high interest rates

OTTAWA –

The Canadian labour market is exhibiting no indicators of slowing regardless of forecasters anticipating excessive rates of interest to weigh on jobs numbers.

Statistics Canada’s newest labour pressure survey launched Friday confirmed that the economic system added a whopping 150,000 jobs in January.

Meanwhile, extra Canadians had been working or searching for work as 153,000 individuals joined the labour pressure.

Royce Mendes, Desjardins’ head of macro technique, stated robust job numbers recommend rates of interest are both not excessive sufficient or have not had sufficient time to have an effect on the economic system extra broadly.

“At this point, it’s unclear what the appropriate reaction from the Bank of Canada is. But it certainly raises the odds that they may have to reengage with rate hikes this year,” Mendes stated.

With the job market nonetheless tight, the nation’s unemployment charge held regular at 5 per cent, hovering simply above the document low of 4.9 per cent reached in the summertime.

The Canadian economic system has been on an upward development with employment since September, including a complete of 326,000 jobs.

That’s regardless of forecasters anticipating the upper price of borrowing will sluggish the economic system down considerably this yr and weigh on employment.

At its Jan. 25 determination, the central financial institution indicated that it plans to cease elevating rates of interest for now, permitting time for greater rates of interest to work their manner by means of the economic system.

But the Bank of Canada pressured the pause was conditional, leaving the door open for extra charge hikes if inflation proves to be cussed.

In January, Statistics Canada stated job good points had been made throughout sectors within the economic system. Wholesale and retail commerce skilled the biggest good points to employment, including 59,000 jobs, adopted by 40,000 jobs added in well being care and social help.

Most jobs added to the economic system had been full-time, whereas individuals aged 25 to 54 drove the good points.

In a consumer notice, TD director of economics James Orlando referred to as Friday’s report a “blowout.”

“The fact that gains were concentrated in full-time jobs in the private sector, alongside more people working more hours, makes this an even more impressive report,” Orlando wrote.

With the labour market working scorching, wages have additionally been rising, although at a slower tempo than inflation. In January, wages had been up 4.5 per cent on a year-over-year foundation, rising at a barely slower tempo than in December.

The slower wage progress partly displays comparatively excessive common wages in January 2022 as COVID-19 restrictions precipitated job losses in lower-paying sectors.

Revisions to labour pressure survey knowledge recommend wage progress peaked at 5.8 per cent in November.

Since March, the Bank of Canada has raised its key rate of interest eight consecutive instances, bringing it to 4.5 per cent. That’s the very best it has been since 2007.

Typically, greater rates of interest trigger companies and folks to tug again on spending. As spending slows and gross sales fall, companies could alter hiring plans.

As the central financial institution stays laser-focused on bringing down the nation’s inflation charge, which stood at 6.3 per cent in December, it is insisted the tight labour market is an indication of an overheated economic system that is fuelling inflation.

The central financial institution is hoping to see easing within the labour market, one thing it says is important for inflation to return all the way down to its goal of two per cent.

While economists usually notice employment is the final indicator to show throughout an financial slowdown, the labour market has been surpassing most economists’ expectations.

The Bank of Canada is aiming for a “soft landing,” the place inflation falls with out the onset of a severe financial downturn.

And though the economic system is holding up higher than anticipated, Mendes stated it is too early to say whether or not the Bank of Canada will pull off the delicate touchdown.

“I think higher interest rates still need time to work their way through the economy more fully before we can say that we’re out of the woods in terms of the potential for a recession.”

This report by The Canadian Press was first revealed Feb. 10, 2023.