Continued growth in Canada’s labour market might see more Canadians hold onto jobs even as the economy dips into a possible recession, according to a read of the latest employment data released Friday.
Statistics Canada says the country’s employers added 41,000 jobs in April as the unemployment rate held at 5.0 per cent for the fifth consecutive month, just above record lows.
A gain of more than 48,000 part-time positions offset a decline of roughly 6,000 full-time jobs last month. StatCan noted this was the first meaningful uptick in part-time employment since October 2022.
It was mostly men 25 and older landing jobs last month (up 34,000), with hiring strongest in Ontario (up 33,000), according to StatCan. The wholesale and retail trade (up 24,000) as well as the warehousing and transportation industries (up 17,000) saw the biggest jumps in employment.
Average hourly wages rose 5.2 per cent in April, topping the most recent inflation data that saw a 4.3 per cent annual increase in March.
The latest jobs figures once again surprised the consensus of economists who had widely expected growth of about 20,000 jobs in April.
Stephen Brown, deputy chief North America economist with Capital Economics, tells Global News that behind the headline numbers, there were signs of “softness,” such as the drop in full-time work.
Much of the employment growth is being fuelled by strong immigration levels, which Brown says has been helping to drive down vacancies for employers while keeping the unemployment rate steady.
The Bank of Canada’s aggressive rate hikes are expected to filter through to the labour market in the coming months, which could lead to a rise in unemployment.
But Brown says growth in part-time work could see overall employment levels hold steady even as the economy slows.
Get daily National news
The result could be something of a “jobful recession,” he says, whereby Canadians hold onto lower paying jobs even as the economy contracts for a few quarters.
“This is almost this type of situation where it’s going to look like a recession in the statistics if we have one, but it won’t necessarily feel like a recession,” he says.
Friday was also jobs day for the United States.
American employers added a healthy 253,000 positions in April, evidence of a labour market that still shows surprising strength.
The unemployment rate dipped to 3.4 per cent, matching a 54-year low, the U.S. Labor Department said Friday. But the jobless rate fell in part because 43,000 people left the labor force, the first drop since November, and were no longer counted as unemployed.
How will the Bank of Canada react?
The Bank of Canada has warned that a tight labour market with annual wages rising more than five per cent is not consistent with getting inflation back to its two per cent target, unless it comes with an associated rise in productivity.
The central bank is currently on pause from its aggressive interest rate hikes, but has warned it will be ready to raise rates again if economic data suggests inflation is not cooling according to its forecast. Annual inflation came in at 4.3 per cent in March and the Bank of Canada expects it to hit three per cent this summer.
Governor Tiff Macklem warned again in a speech on Thursday that while price pressures are cooling sharply, the path from three per cent inflation back to the Bank of Canada’s two per cent target might be particularly difficult given the tightness of the labour market.
TD Bank senior economist James Orlando wrote in a note to clients on Friday that strong immigration over the past year will allow the Bank of Canada, which will deliver its next interest rate decision June 7, to remain on hold despite continued jobs growth.
“The inflow of new Canadians is changing the calculus on what a standard jobs report looks like,” he wrote.
“This means that the ‘surprise’ employment report isn’t adding the same labour market tightness as it would have in the past.”
But BMO chief economist Doug Porter said Friday that while the job numbers might not be as strong as the headline figures suggest, given the boost from immigration and the part-time nature of the growth, the labour market “is simply not showing any signs of strain whatsoever.”
“If this persists through the spring, the Bank of Canada may yet be forced to rethink its rate pause, especially with the housing market showing signs of reviving,” he wrote in a client note.
After the jobs report came out, markets priced in a slightly higher chance of a 25-basis-point hike from the Bank of Canada before July, according to CIBC Economics.
Brown told Global News that weakness in the professional services and information technology sectors — two sectors that tend to contribute to strong wage growth — suggest that wage pressure might start to ease in the second half of the year, allowing the Bank of Canada some hope that it can remain on pause for now while its rate hikes to-date take hold in the economy.
“I don’t think the bank will be too concerned just yet, but we do need to see some improvement by the end of this quarter for the bank to have some confidence about its wage growth and inflation will start to decline back to two per cent rather than get stuck at, say, three per cent.”
— with files from The Canadian Press, The Associated Press
Comments