By Robb M. Stewart
OTTAWA--Canada's labor market continues to run slightly hotter than expected, with another solid month of hiring buoyed by rapid population growth and signs still-high wage growth has begun to cool.
Employers added 40,700 jobs last month, though that wasn't enough to prevent the unemployment rate from ticking up 0.1 percentage point to 5.8%, Statistics Canada reported Friday. The pace of hiring was the strongest in five months and beat market expectations for the addition of a modest 20,000 jobs.
The unemployment rate, which unexpectedly slipped to start the year, has held relatively steady in recent month after climbing from April to November last year.
Wage growth, which the Bank of Canada has said needs to show signs slowing before it is ready to pivot to cutting rates, eased for a second straight month, a sign of more slack in the labor market as population growth continues to outpace hiring.
While details behind Statistics Canada's latest labor force survey were more mixed, the overall picture supports the central bank's view that the job market is gradually, and relatively smoothly, adjusting to an environment of high rates that continues to weigh on inflation and dampen economic growth.
"The numbers are consistent with the Bank of Canada's view that the wheels aren't coming off the economy just yet, so there's no need to rush into rate cuts," said Royce Mendes, head of macro strategy at Desjardins Capital Markets.
In the U.S., the hiring boom there continued last month as a seasonally adjusted 275,000 jobs were added to the economy, according to the U.S. Labor Department. The unemployment rate rose to 3.9%, ahead of the 3.7% economists had projected, while wage gains in the U.S. also slowed. When calculated using Labor Department methodology, Canada's unemployment rate rose to 5.0% from 4.8% in January.
Statistics Canada's survey showed labor force participation, the proportion of the working age population employed or looking for work, was steady at 65.3% last month. Total hours worked were little changed month-over-month, rising 0.3%, but were up 1.3% on a year earlier.
However, the proportion of the population 15 and older who are employed slipped 0.1 point to 61.5% in February, a fifth consecutive monthly fall and the longest downward stretch since drop that ended in early 2009. That came as the labor force continued to expand amid strong population growth, which hit 83,400 last month.
All the jobs added in February were in full-time employment, which climbed by 70,600 from the month before, and more than made up for a 29,900 fall in part-time jobs. On a year ago, full-time employment was up 259,900, and part-time jobs up 108,100.
Less encouraging for the market, it was the ranks of the self-employed that saw growth, increasing 38,300 from the month before as the numbers in the private sector dropped by 16,400. February was the first month increase since last August for the self-employed segment, which is up only marginally over the last year.
"The surge in the population continues to flatter the Canadian jobs figures, and there is evidence from a further decline in the employment ratio and increase in long-term unemployment that labor market conditions are continuing to weaken," Andrew Grantham, senior economist at CIBC Capital Markets, said. "However, this is happening only gradually and not in a way that demands an imminent reduction in interest rates."
The central bank on Wednesday held its policy rate at a more than two-decade high of 5%, arguing that with annual inflation still close to a full percentage point above its 2% target and underlying price pressures persisting, more time was needed to give high rates a chance to work through the economy. Macklem noted the labor market has come back into better balance, with an unemployment rate that while up remains low historically and vacancy levels that have declined to more normal levels, but said policymakers need more signs wage growth has begun to ease.
Average hourly wages for permanent employees were up 4.9% from a year earlier, softer than the 5.1% growth economists anticipated and down from January's 5.3% advance. Though moving lower, the pace of growth remains well above broader annual inflation, which was 2.9% in January.
"The unemployment rate is still expected to edge higher in the first half of this year alongside slowing per-capita GDP," Royal Bank of Canada assistant chief economist Nathan Janzen said. He, like other economists, continues to expect that will open the door for the central bank to start cutting rates from June.
Write to Robb M. Stewart robb.stewart@wsj.com
(END) Dow Jones Newswires
03-08-24 1119ET
