Strong employment growth leads Canada towards the pre-pandemic levels

Last month, Canada’s job market kept recovering, reporting a stronger-than-expected employment increase, as businesses started hiring in order to meet a high demand for services after COVID-19 restrictions were eased or lifted.

According to Statistics Canada, the national economy created 90,200 jobs in August, outpacing the 68,200 consensus expectation of a Bloomberg survey. As a result, the unemployment rate was down from July’s 7.5% to 7.1%.

Such a report, following an increase by 94,000 positions in July and 231,000 in June, proves that Canada’s job market strengthened during the summer as high vaccination rates let businesses reopen and hire new workers.

“It’s still the reopening story,” – noted Veronica Clark, an economist with Citigroup Global Markets Inc.

The total growth in August has led employment in the service sector back to its pre-pandemic level. The sectors, significantly affected by the pandemic, e.g. accommodation and food services, showed the largest increases. Most of the gains were reported in full-time employment (68,500 new jobs), while part-time employment rose by 21,700 positions.

According to the central bank’s Governor Tiff Macklem, the summer rebound in employment underlines how the “unevenness” in the job market is moderating after the pandemic affected low-wage workers especially hard.

Meanwhile, policy makers still believe the employment has to exceed the pre-pandemic levels in order to show a full recovery, as the population has grown since the beginning of the crisis. Strong job numbers increase the possibility of another reduction of government bonds purchases by the Bank of Canada in October.

“This report is bringing some comfort to the central bank that the unexpected decline in July GDP doesn’t show the true pace of economic growth,” – noted Benjamin Reitzes from Bank of Montreal.

“We still expect the first rate increase by the BoC in the first quarter of 2023, but a sooner move is possible in case the job market doesn’t show any slowdowns during the fall and winter”, – says Andrew Husby, Bloomberg economist

August hiring numbers led Canada employment within 156,000 jobs of pre-pandemic levels. Meanwhile, hours worked were only 0.1% higher than in July.

In case of the U.S., job growth slowed last month, restrained by concerns over the quickly spreading delta variant and troubles with finding workers. As Canada is also facing another COVID wave, economists predict slower growth this fall.