The dynamism of the labor market does not run out

Statistics Canada said Friday that the unemployment rate fell to 5.0% last month. This is its third decline in four months and brings it closer to the record low of 4.9% it hit in June and July.

“You always have to be a little bit careful not to make too much of a Canadian employment report,” said Douglas Porter, chief economist at the Bank of Montreal.

“However, this is the second time in the last three months that the economy has created 100,000 new jobs, which is a historically large number. »

In the latest Labor Force Survey, Statistics Canada pointed out that employment growth is associated with an increase in full-time work.

The number of private sector workers also increased last month, and jobs increased across all industries.

At the same time, employment in the public sector remained stable.

Many economists expected a slowing economy in response to rising interest rates to show up in fourth-quarter economic data. However, employment numbers show no sign of the economy slipping.

Douglas Porter admitted: “For those of us predicting at least a mild recession this year, it raises doubts.”

Wages continued to grow at an annual rate above 5.0% for the seventh straight month, rising 5.1%.

However, this wage increase remains below the country’s annual inflation rate of 6.8% in November.

Absenteeism is on the rise

For 2022, economist Brendon Bernard, of recruiting website Indeed, noted that “the big story of low unemployment and strong labor market conditions continues into the second half of the year.” .

Employment among young people aged 15-24 increased in December, and the job losses that occurred between July and September were fully recovered.

The jobs report also noted that the employment rate for women ages 25-54 hit a record high last month.

Despite the monthly increase in employment, working hours remained stable in December. Douglas Porter believed that this was probably due to the high number of sick people.

Statistics Canada said 8.1% of workers missed work due to illness or disability last month, compared with 6.8% in November.

The Bank of Canada has previously cited the country’s tight labor market as a cause of high inflation.

“Tight labor markets are a symptom of a widespread imbalance between supply and demand that is fueling inflation and hurting all Canadians,” Central Bank Governor Tiff Macklem said in a speech in November.

The central bank has raised the key interest rate seven times in a row since March 2022 to 4.25%. He hopes that this increase in the cost of borrowing will slow the rate of inflation and cool the economy.

Although economists expect unemployment to rise in response to higher borrowing costs, the labor market has remained resilient in recent months.

The strength of the labor market has fueled some optimism that the expected economic slowdown may ultimately be less painful than a typical recession.

However, Brendon Bernard believes that “things can move pretty quickly from month to month” when it comes to employment data.

The Bank of Canada indicated last month that it was ready to end its cycle of aggressive rate hikes, depending on developments in the economy.

While the Bank of Montreal still expects another rate hike at the end of the month, Douglas Porter said the latest jobs report doesn’t end the debate.

“But at the very least, I would say it strengthens the case for at least one more rate hike in January. »

The Bank of Canada will announce its next key interest rate decision on January 25.

In the meantime, he will have the opportunity to look at inflation data for December, as well as the results of his research on the business outlook and consumer expectations.

Stable employment in Quebec

Last month, the unemployment rate in Quebec was measured at 4.0%, up 0.2 points from November. Employment was flat after rising in three of the previous four months.

In Ontario, employment increased by 42,000 in December and the unemployment rate fell 0.2 percentage points to 5.3%.

The jobless rate in the Maritimes increased in New Brunswick from 7.3% to 8.1% in November to December, as well as in Nova Scotia from 6.0% to 6.7%. In contrast, Prince Edward Island fell to 5.6%, down from 6.8% in November.

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