Canada’s job market shows slower growth pace

Last month, Canada’s job market kept recovering with retail businesses raising their hiring numbers. However, the growth pace has started slowing down.

According to Statistics Canada, the national economy added 31,200 jobs in October. Meanwhile, economists polled by Bloomberg expected 41,600 new jobs. The unemployment rate was down from September’s 6.9% to 6.7%, and total hours worked were up by 1%.

Such results point to the on-going economic recovery, as companies hire workers while COVID-19 restrictions are lifted. At the same time, the report also shows how future job gains will get back to more normal levels (the average for the two years before the pandemic is 23,000 per month), as labor slack decreases.

“Basic indicators of limited labor market slack are beginning to appear,” – noted Simon Harvey of Monex Europe Ltd.

In October, we’ve seen the number of Canadians in the labor force going down by 25,000. A large share of increases last month was seen in the pandemic-exposed retail sector, which came back to pre-pandemic employment levels with a net growth of 72,000 jobs.

However, all other segments slowed down. The employment in goods producing industries fell by 6,200. Public administration also reported a drop, following a September increase caused by temporary hiring of poll workers.

All September gains were in full-time employment, and average hourly wages for permanent workers rose by 2.1% annually. It means the influence of growing inflation has yet to push pay gains higher. It should give some comfort to the Bank of Canada, arguing that a stronger prices pressure will hardly lead to a labor cost spiral.

Canada’s job market had been showing good results after a rebound from a third wave of COVID earlier this year. The national economy added 600,000 new net jobs since May, bringing employment beyond pre-pandemic levels.

Such increases forced the BoC to reduce its stimulus last week. Canada’s employment is about 30,000 higher than it was in February 2020, after we’ve lost 3 million jobs.

The central bank still believes slack remains in the economy, with the labor force growing since the crisis started. The unemployment rate is also almost 1% above the pre-pandemic levels today.