Canada’s economy has hit its longest run of monthly job gains since 2017, defying expectations for a coming slowdown.
(Bloomberg) — Canada’s economy has hit its longest run of monthly job gains since 2017, defying expectations for a coming slowdown.
The country added 41,400 jobs in April, all in part-time work, while the unemployment rate held near a record low at 5%, where it’s been since December, Statistics Canada reported Friday in Ottawa. The figures beat expectations for a gain of 20,000 positions and a jobless rate of 5.1%, according to the median estimate in a Bloomberg survey.
It’s the eighth consecutive month of job creation, bringing total employment gains since September to 423,900, and was again accompanied by robust wage gains. The economy hasn’t consistently added this many jobs in six years, a surprising mark of endurance in the face of sharply higher borrowing costs meant to beat back inflation.
After an unexpectedly strong start to the year, Canada’s jobs market is still showing momentum in the second quarter, with few signs of weakness in the wake of the Bank of Canada’s aggressive increases to interest rates. The gain adds to the more than 200,000 jobs filled or created during the first three months of 2023, a spike in employment many economists think accompanied a short rebound before growth stalls later this year.
“The key point is that there is no evidence that the labor market is softening at all, lending important support for the broader economy,” Douglas Porter, chief economist at Bank of Montreal, said in a report to investors. “If this persists through the spring, the Bank of Canada may yet be forced to rethink its rate pause.”
Bonds sold off, with the 2-year Canada yield soaring about 10 basis points from its level before the data release, to 3.701% at 11:29 a.m. Ottawa time.
Consistently hotter-than-expected job gains, coupled with sticky underlying price pressures, could bring the central bank off the sidelines, after officials held rates at 4.5% for two straight meetings. This is the only jobs report between the central bank’s April 12 decision and its next one on June 7. April inflation numbers, due May 16, will be another key input for policymakers and traders to anticipate their next move.
“We’re now over a year into the Bank of Canada’s rate hike cycle,” Brendon Bernard, an economist at Indeed Canada, said on BNN Bloomberg Television. “Overall, big picture, the rate hikes aren’t really showing up in these jobs numbers.”
Traders in overnight swaps firmed up bets that the central bank will need to keep rates elevated for longer. Odds of another hike rose marginally after the report, and expectations of cuts at the end of this year were trimmed.
During deliberations ahead of the last decision, policymakers considered raising borrowing costs, with stronger-than-expected growth and still-elevated core inflation cited as possible justifications. But officials opted to stand pat, in part because they expect both the labor market and consumer prices to cool in the months ahead.
Governor Tiff Macklem said Thursday that the jobs market remains tight and that wage growth needs to moderate in order to rein in inflation. While he reiterated a willingness to hike again if needed, he also said renewed global banking distress could alter the path of rates in Canada.
The persistent tightness of the labor market is boosting workers’ compensation, with wages increasing more than 5% for a third straight month. Policymakers have stressed that wage pressures of that magnitude aren’t consistent with getting inflation back to target unless matched by strong productivity growth, which has been declining.
In April, total hours worked rose 0.2% on a monthly basis and were up 3.8% compared to a year earlier. The participation rate held steady at 65.6%.
Since February, monthly employment growth has averaged 33,000. The employment rate — the share of the population aged 15 and older who are employed — held steady at 62.4%, as job gains kept up with the pace of growth in the labor force, which has been supported by high levels of immigration.
“While the strong headline increase in jobs will have gross domestic product tracking forecasts being upgraded, the ongoing spike in the population means that hiring isn’t tightening the labor market as much as it would otherwise be,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a report to investors.
Job gains were led by increases in wholesale and retail trade, as well as transportation and warehousing. Employment rose in Ontario and Prince Edward Island, while it declined in Manitoba and was little changed in other provinces.
(Updates with additional context, new chart and economist reaction throughout.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.