Canadian employment data didn’t get the memo that higher rates are ruining the economy. Statistics Canada (Stat Can) released the January Labour Force Survey today. Employment is soaring, and showing few signs of slowing—Toronto and Vancouver being minor exceptions. The boom is likely to present concerns for the central bank, which had been expecting the economy to cool.
Canada Added 150,000 Jobs Last Month
Canadian employment continues to run hot, despite ominous warnings of a recession. Seasonally adjusted employment rose 0.8% (+150k jobs) in January. Matching the booming population growth, the unemployment rate of 5.0% was unchanged. The growth rate is still larger than anything seen prior to the pandemic, despite rates.
The gains were fairly widespread, running across both private and public sectors. Industries that received the biggest boost were Retail & Wholesale (+58.7k), Healthcare & Social Assistance (+40k), and Education Services (+18k). All three sectors are in a position to get a boost from robust population growth, and they did.
Toronto & Vancouver Buck The Trend, Unemployment Rates Rise
One notable hiccup is the rising unemployment rates in both Toronto and Vancouver. Toronto saw unemployment climb to 5.9% (+0.1 points) in January, while Vancouver hit 4.7% (+0.2 points). Both of those rates are still very low, and better than last year.
However, it’s noteworthy that Toronto’s unemployment rate is higher than the national average. Worth watching both cities, since they’re heading in the wrong direction.
Canada’s Overheated Labor Market Presents Inflation Concerns
Canada’s oldest bank remains optimistic but cautious about the latest numbers. “One always has to take care when reading a Canadian employment report—for example, the prior month’s huge gain was itself revised down (earlier) by more than 30,000 jobs,” warned Douglas Porter, chief economist at BMO.
Adding, “Still, even if there are some misgivings about the massive headline gain, the labour market is sending precisely zero signs of economic stress.”
Generally speaking, the growth is good news—though maybe not for the Bank of Canada. Just a few weeks ago, the central bank announced they would pause rate hikes and wait to assess the economy. The prevailing belief is that things will slow, and will lower inflation as well. Employment data from January showed the opposite, with unusually fast growth.
“For the Bank of Canada, the strong report must make them at least a tad nervous about their freshly-minted pause—we said the bar for any move would be very high, but the employment gain is pretty towering indeed,” warned Porter.
“This is actually the last jobs report the Bank will see before it next decides in March, but their upcoming decisions will largely be determined by inflation, and the employment data may prove to be just loud noise, provided inflation continues to ebb.”