Canada’s labor market showed signs of improvement in September, adding 47,000 new jobs and reducing the unemployment rate to 6.5 percent—the first decline since the beginning of the year, according to a report from the government statistical agency released on Friday. This surge in job creation exceeded analyst expectations, signaling a positive shift in the employment landscape after several months of stagnation.
The job gains were entirely attributed to full-time positions within the private sector, although total hours worked decreased for the month, and wage growth showed signs of slowing. Leslie Preston, a senior economist at TD Bank, noted in a research note that while the decrease in the unemployment rate is encouraging, it does not alter the broader trend of a cooling labor market, particularly since the Bank of Canada began raising interest rates.
The central bank has been actively increasing rates since March 2022 to combat rising inflation, but has recently shifted its approach as inflation has begun to ease. Analysts are now predicting a potential cut in the key lending rate at the upcoming central bank meeting on October 23. While there is a consensus on the likelihood of a rate cut, estimates vary, with some forecasting a 50 basis point reduction and others, like Preston, suggesting a more modest 25 basis point cut.
Statistics Canada highlighted that job growth was observed across several sectors in September, including information, culture and recreation, wholesale and retail trade, and professional, scientific, and technical services. Despite the overall positive news, the mixed signals regarding hours worked and wage growth suggest ongoing challenges in the labor market as it adjusts to the new economic conditions.