Canada added 21,000 new jobs leading to unemployment rate decline

According to Statistics Canada, the national employment was up in September for the first time in four months. However, the increase was still quite modest pointing to the fact that the labor market keeps functioning almost at full capacity.

Last month, Canada added 21,000 new jobs: both full-time and part-time. Such results coincide with the median forecast of a 20,000 increase expected by economists in a Bloomberg poll.

The jobless rate was down to 5.2%, offsetting a 0.5% hike to 5.4% seen in August. Hours worked fell by 0.6%.

The employment growth ended three-months period of decreases, during which the economy lost more than 113,000 jobs.

The main question now is how much of the slowdown was caused by labor supply factors and how much by higher borrowing costs and demand weakness. These proportions are extremely important to the central bank, which has been raising interest rates aggressively amid concerns over demand for labor exceeding supply.

As we can see from yesterday’s speech by Governor Tiff Macklem, the Bank of Canada considers the labor market functioning at or near full capacity. According to Macklem, the jobs market is still extremely tight, with wage gains expanding and inflation pressures showing no signs of easing.

The BoC has already raised borrowing costs by 3% since it started its hike cycle in March, and markets expect another increase by 0.5% at the next meeting on October 26.

The participation rate, which has been going down since May, fell to 64.7% in September, as number of people in the labor force declined by 20,300, Statistics Canada said. The labor force fell by approximately 80,000 since May.

Employment gains were reported in four provinces, with the largest hike in British Columbia. Meanwhile, fewer people worked in Ontario and Prince Edward Island.