Canada created 10 times more jobs in January than expected

A recent report by Statistics Canada shows that the national employment rate rose much faster than expected last month. This means Canada’s labour market doesn’t show many signs of cooling even amid aggressive increases in interest rates.

In January, the Canadian economy added 150,000 jobs, which is 10 times more than the average forecast of economists surveyed by Bloomberg. The unemployment rate remained unchanged at 5%.

The report points to broad-based increases during the fifth month of job hikes in a row, pushing total employment gains since September up to 326,000. The job growth is accelerating with January’s numbers more than doubling the results of December (almost 70,000 positions).

The data suggest Canada’s labour market is still overheated, which leads to questions as to whether the central bank really stopped raising rates. The December numbers, combined with other better-than-expected results, caused a final interest-rate increase by the BoC last month before it decided to take a pause and assess the state of the national economy.

According to Governor Tiff Macklem, who raised the Bank’s key lending rate by 4.25% to 4.5% in less than a year, the lagged effect of higher rates will bring economic growth down close to zero in the first three quarters of this year. During its last meeting, the central bank noted it plans to keep borrowing costs unchanged, but could make more increases in case there’s enough evidence of a hotter-than-expected economy. Before that meeting, markets were pricing less than one in ten possibilities of one more rate increase in March.

“Although Canadian central bankers underscored they would need enough evidence of the economy moving in the wrong direction, today’s report shows that it is not,” – noted Royce Mendes from Desjardins Securities.

Canada is benefitting from sharp population growth because of an open policy on immigration, and the poll results show that non-permanent residents (including students and temporary workers) are facing enormous job growth. The labour force participation rate was up from 0.3% to 65.7%, as the labour force rose by 153,000, or 0.7%.

The significant increases seen in January pushed the employment rate to 62.5%. The last time we’ve seen such results was in April and May 2019. Last month’s employment growth was mostly supported by women and men in their prime working years: both in private and public segments.

The employment rate was up in five provinces, including Ontario, Quebec and Alberta. It rose in six industries, with wholesale and retail trade leading the way.