By Robb M. Stewart
OTTAWA--Flat hiring in Canada last month despite continued strong population growth left the country's jobless rate steady as signs build the labor market continues to loosen with the weakening economy.
Still, any comfort the central bank might take from the latest data may be tempered by the strongest rise in wages in almost three years.
The number of employed working-aged people in Canada was effectively unchanged in December, rising a net 100 jobs from the month before, while the unemployment rate held at 5.8%, Statistics Canada reported Friday. The pace for the months was cooler than market expectations were for hiring to add a modest 15,000 jobs and an unemployment rate one tick higher at 5.9%.
The rate of employment in the country trended lower over the course of the year and the jobless rate had increased in five of the last seven months through November, continuing to edge up from the record low 4.9% seen in mid-2022, as hiring has failed to keep up with Canada's growing labor force in recent months.
Before last month, employment gains had been relatively modest yet remained resilient even as the wider economy has struggled, contracting on an annualized basis in the third quarter of the year. Employment growth averaged 23,000 a month in the second half of 2023, slightly less than half the monthly average in the first half, while the population aged 15 and older grew by 75,000 in December and averaged about 79,000 a month for the year. As a result,the proportion of the working-age population who are employment fell for a fifth time in the last six months with a slip of 0.2 percentage point to 61.6% last month.
When calculated using U.S. Labor Department methodology, Canada's unemployment rate in December was steady at 4.7%. In contrast,U.S. hiring picked up in December with 216,000 jobs added and the unemployment rate held at 3.7%, the Labor Department said.
"Sluggish results suggest that the softening seen in the broader economy is finally catching up with the job market," said Douglas Porter, chief economist at Bank of Montreal.
Job growth for December came from the services sector, which increased positions by 43,100 despite a third consecutive month of declines in wholesale and retail trade. That was largely offset by drop of 42,900 jobs in the goods-producing sector, with losses in agriculture, construction and manufacturing. Employment was also roughly balanced between the loss of 23,500 full-time and the addition of 23,600 part-time roles, the data agency said.
Overall, there were 1.2 million unemployed in Canada in December, an increase of 19.3% from a year earlier.
For the Bank of Canada, which has expressed concerns about sticky wage growth, economists expect it to focus on a 5.7% jump in average hourly wages for permanent employees, the biggest annual increase since January 2021. The central bank, which next decides on interest rates Jan. 24, is looking for signals its past aggressive rate increases have done enough to tame inflation even as it projects economic growth will remain subdued near-term after a contraction on an annualized basis in the third quarter of the year.
"While a further decline in the employment rate is evidence that the labor market continues to weaken, the decline in participation and acceleration in wage growth suggests that it isn't loose enough for the Bank of Canada to cut interest rates quite yet," said Andrew Grantham, senior economist at CIBC Capital Markets.
With almost no employment growth and unchanged unemployment last month, the labor-force participation rate--the proportion of the working-age population who were either employed or unemployed--edged down 0.2 points on the month before to 65.4%. The rate has fallen from a recent peak of 65.7% in June, with most of the decline since June attributed to a drop in the youth participation rate.
Economists widely anticipate that unemployment will resume a slow advance in the early months of the new year, which should put downward pressure on wage growth and could provide ground for the central bank to begin cutting a benchmark policy rate that has stood at more than two-decade high of 5% since July.
Write to Robb M. Stewart robb.stewart@wsj.com
(END) Dow Jones Newswires
01-05-24 1040ET
