December’s jobs report is a ‘mixed bag’ for the Bank of Canada. Here’s why

The national jobless rate held steady at 5.8 per cent in December as employment was “virtually unchanged,” according to Statistics Canada.

The agency said Friday that the economy added a total of 100 jobs for the final month of the year.

BMO chief economist Doug Porter said in a note Friday that 100 jobs is roughly equivalent to one decently sized fast food outlet — an “imperceptible” gain.

The result came as the number of full-time jobs fell by 23,500 in December, offset by a gain of 23,600 part-time positions in the month.

The number of jobs in the professional, scientific and technical services sector rose by 45,700 in the month, while the number of jobs in health care and social assistance climbed by 15,500.

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The wholesale and retail trade sector lost 20,600 jobs in December.

Job growth slowed significantly in the back half of 2023, with employers adding an average of 23,000 positions per month compared to 48,000 additions monthly in the first half of the year.

The unemployment rate held steady in December as the labour force grew by just a few thousand heads, well below previous months that saw tens of thousands of people join the pool of workers amid rapid population growth in 2023.

Friday’s labour force report shows a 5.4 per cent jump in average hourly wages for December, up from 4.8 per cent in November. Porter noted this was the fastest pace for wage gains in more than a year.

The Bank of Canada has previously flagged that wage growth in the realm of four to five per cent is not consistent with achieving its two per cent target without associated gains in productivity. Productivity has meanwhile declined for the past six quarters in Canada, according to StatCan.

The Bank of Canada is watching for slowing in the jobs market as it decides where to take its benchmark interest rate in its next decision Jan. 24. The Bank’s policymakers have expressed that the rates might right need to rise further if progress taming inflation stalls.

But economists who spoke to Global News heading into 2024 said they expect the central bank to cut rates, not hike them, with most timing an easing for the policy rate for the second or third quarter of the year.

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CIBC senior economist Andrew Grantham called the December jobs report a “mixed bag” in a note Friday.

A drop in the employment rate shows the labour market continues to soften, but a declining participation rate and accelerating wage growth should be enough to offset that weakness in the Bank of Canada’s eyes, he said.

“We continue to see the unemployment rate creeping higher in the first half of 2024, reaching a peak of between 6-6.5 per cent, which would bring a first interest rate cut from the Bank in June,” he wrote.

Porter also said that ongoing weakness elsewhere in the jobs report suggests that the unemployment rate will rise past six per cent in the new year, which should “take some steam” out of wages.

But he said that a “solid” jobs result in the United States — a Friday report showed unemployment held at 3.7 per cent south of the border amid a gain of 216,000 positions — and strong wage growth should serve to keep the Bank of Canada on the sidelines, remaining “patient on the rate cutting front.”

— with files from The Canadian Press