Jobs market cools in November. What that means for the Bank of Canada

A rising unemployment rate and signs of slowing in the economy should be enough to keep the Bank of Canada on hold at its final interest rate decision of the year, according to some economists.

Canadian employers collectively added some 25,000 jobs in November, Statistics Canada said Friday.

Canada’s unemployment rate ticked up to 5.8 per cent in November from 5.7 per cent the previous month. It started the year at a near-record low of 5.0 per cent.

StatCan says job gains were seen in full-time work and in the private sector, with losses in self-employment and part-time work.

Manufacturing and construction saw the largest gains in employment, while the most jobs were shed in wholesale and retail trade as well as finance, insurance, real estate, rental and leasing.

Average hourly wages were up 4.8 per cent annually, the agency said Friday.

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As labour market conditions weaken, the survey finds unemployed people last month were more likely to have been laid off compared with a year ago.

After a robust bounce back from the pandemic, the job market has cooled this year as high interest rates weigh on businesses.

Forecasters expect this trend to continue as the economy struggles to grow and interest rates remain elevated.

The Bank of Canada has been looking for softening in the labour market as it gauges the forecast for inflation and where to take its benchmark interest rate next.

The central bank’s final rate decision of the year comes on Wednesday.

TD Bank senior economist James Orlando said in a note to clients on Friday that the November jobs report, combined with Thursday’s report showing the economy shrank in the third quarter, will be enough to keep the Bank of Canada’s policy rate on hold next week.

Benjamin Reitzes, BMO’s managing director of Canadian rates and macro strategist, said in a note that wage gains are “still well above” the central bank’s comfort levels. Monetary policymakers have flagged that wage growth could fuel underlying inflation if not accompanied by similar gains in productivity, which Reitzes noted has been “paltry” in Canada.

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But Reitzes concluded that the Bank of Canada will likely focus on the unemployment rate’s rising trend as a positive, and enough to warrant another meeting without an interest rate hike.

“Nothing here to shift expectations for the BoC to stay on the sidelines next week,” he said.

Orlando said that he expects the Bank of Canada will not “signal victory” next week but will show confidence that the process of slowing the economy to tame inflation is working.

“This rhetoric will likely continue over the coming months, before it switches gears and starts to signal the beginning of rate cuts in the spring,” he said.

RBC assistant chief economist Nathan Janzen said in a note Friday that while he agrees the central bank is likely done hiking “for now,” he expects the Bank of Canada will be “cautious” in pivoting to rate cuts. He pegged the drop in rates to begin in the second half of 2024.

— with files from The Canadian Press