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(Bloomberg) — Canada’s hard labor market beat expectations with job increases, but the unemployment rate and declining hours worked point to developing economic weakness, specifically in the financial and real estate sectors.
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The country created 25,000 jobs in November, while the unemployment rate rose 0. 1 percentage points to 5. 8% from January 2022, Statistics Canada reported Friday in Ottawa. The jobs numbers beat expectations for a gain of 14,000 jobs but matched the expected unemployment rate, according to the median estimate of a Bloomberg survey of economists.
Employment in the finance, insurance and real estate sectors fell by 18,000 in November. Since July, the number of jobs in those industries has declined by 63,000, the steepest decrease of any category over the period. Canada’s major banks have been trimming staff; Toronto-Dominion Bank was the latest to announce this week it would cull thousands of positions this year and next.
Bonds fell and the Canadian dollar rose. The yield on the benchmark 2-year Canadian bond was 4. 227% at 9:26 a. m. Ottawa time, an accumulation of about five key issues from its pre-data level. The Canadian dollar rose approximately 0. 3% on the day to constant C$1. 3cinco20. with the US dollar.
Total hours worked fell 0.7% on a monthly basis, and were up 1.3% from a year ago. It was the biggest monthly decline since April 2022, confirming weak economic momentum in the middle of the fourth quarter and also shows that higher interest rates are already cutting into hours and employment in rate-sensitive sectors.
“These figures suggest that the economy entered the holiday season on a comfortable footing,” Royce Mendes, head of macroeconomic strategy at Desjardins Securities, said in a report to investors. “As the lagged effects of rate hikes continue to be felt in the economy, we expect additional weakness in the labor market to impact underlying inflationary pressures in the coming months. This spark prompted the Bank of Canada to start cutting rates in the second quarter of next year.
The pace of hiring is stuck below the population-driven expansion of the labor force. “We have to remember that 25,000 isn’t what it used to be,” Brendon Bernard, senior economist at Indeed, said on BNN Bloomberg Television. The working-age population grew by about 78,000 during the month, “so in that context, things are actually lagging.”
Wage expansion for permanent workers held steady at 5%, faster than expectations for a 4. 9% increase. This is the fifth consecutive month that velocity has remained stagnant at 5% or more, degrees that Bank of Canada Governor Tiff Macklem has said are inconsistent with a timely return to the 2% inflation target. Excess demand has disappeared and the economy is expected to remain weak in the coming quarters, the governor said, which should help slow price increases.
The report comes a day after gross domestic product showed the economy contracted in the third quarter and income remained flat. Third-quarter GDP fell at an annualized rate of 1. 1%, wiping out almost all of last quarter’s growth.
The jobs data is the last key input for policymakers before the next rate decision on Dec. 6. The majority of the forecasters in a Bloomberg survey expect the central bank will keep rates unchanged for a third straight meeting and hold them at 5%, a likely end point in this tightening cycle. Markets and economists expect policymakers to start cutting rates in the first half of next year.
Ontario Cities Are Suffering
Turnout held steady at 65. 6% in November.
The employment rate — the proportion of the working-age population that’s employed — fell 0.1 percentage points to 61.8%. The employment rate has decreased in four of the past five months, and has generally trended down since January, when it reached a recent high of 62.5%.
The unemployment rate has risen 0. 8 percent since April. Compared to last year, those unemployed in November were more likely to have been laid off from their previous job, reflecting tougher economic and working conditions, the statistics firm said.
The increase in employment in November was due to increases in production and construction. Regionally, employment increased in New Brunswick, while it decreased in Prince Edward Island and was poorly replaced in all other provinces.
Among Canada’s largest cities, the highest unemployment rate is in Windsor, St. John’s. Catharines-Niagara and Oshawa, all in Ontario. Catharines-Niagara and Oshawa also recorded the largest increases in the unemployment rate from April to November.
Wholesale and retail trade shed 27,000 jobs last month, and employment in the industry was at its lowest since in December last year.
–With assistance from Erik Hertzberg.
(Updates with market reaction, more details and economist comments.)
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