Strong Job Growth in Canada

Last Friday, Statistics Canada reported the labour market added 150,000 positions in January after a gain of roughly 69,000 jobs in December.  That is a huge increase as financial analysts were expecting an increase of 15,000 jobs. The national unemployment rate held steady at 5 per cent.

As the Globe and Mail reported, the recent run of upbeat data points to a resilient economy that is managing to defy expectations by avoiding a recession. However, that underlying strength could force the Bank of Canada to continue raising interest rates – or keep them higher for longer – to get inflation under control.

The Statistics Canada report showed strength in various parts of the labour market. Jobs with full-time hours increased by 121,000 in January, while the private sector drove a gain of 115,000 positions. After several months of losses, retail and wholesale trade jumped by 59,000 jobs, the largest gain by industry. Health care and social assistance rose by 40,000 positions. The labour market is drawing on many new participants. In January, an additional 153,000 people joined the labour force – meaning, they either took jobs or are actively looking for one. The participation rate is increasing in most major demographic groups.

Canada’s population is growing quickly, which is helping to expand the supply of labour. However, the labour force is growing at a quicker pace than the population, indicating that many people are being coaxed into jobs.

From the Bank of Canada’s perspective, the rapid expansion in available workers is a hopeful sign, because it allows companies to find employees, but without a further tightening of labour market conditions that puts upward pressure on wages.

By now, many economists projected that Canada would be mired in the early stages of a mild recession. The Bank of Canada said that growth would stall over the first half of 2023. Instead, Friday’s report suggests the economy is continuing to chug along with growth, at least for now.

Average hourly wages rose 4.5 per cent over the past year, down from 4.8 per cent in December. However, the year-over-year comparison was partly a reflection of higher wages in January 2022, when many lower-paid service workers were temporarily laid off as the Omicron variant of COVID-19 led to a spike of infections.