Signs of slowing economy continue
Canada’s unemployment rate rose to 5.8% in October in a further sign that the economy is continuing to feel the impact of interest rate increases by the central bank.
Statistics Canada’s November labour force survey, released on Friday, showed that the economy added 25,000 jobs last month, with the manufacturing and construction sectors seeing employment gains while wholesale and retail trade posted the most significant losses.
Still, that jobs growth could not keep up with the pace of an expanding labour force. While Canada’s labour market remained surprisingly resilient throughout 2022 and the opening months of this year, the unemployment rate has ticked up steadily since the spring with the economy also beginning to contract, according to StatCan.
Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen said in a note following the Friday report that the scale of increase seen in the unemployment rate since April (0.8 percentage points) “usually only happens in the early stages of a labour market downturn.”
The latest figures strengthen the case for the Bank of Canada to keep interest rates where they are in its final rate decision of the year, Janzen said, with a rate cut remaining likely at some point in 2024.
“Higher unemployment to-date has come mostly via slower hiring rather than more firing,” he said. “Wage growth is running hot, but should cool going forward as labour demand cools relative to supply. November was the first month since the pandemic that Canadian businesses reported insufficient demand for their products as a bigger concern than labour shortages.
“The BoC will also be cautious about pivoting to rate cuts too quickly, but our own assumption is that they will start to push the overnight rate lower in the second half of next year.”