Canada's labor market displayed unexpected strength in September 2023, adding 64,000 jobs and surpassing economists' estimates. The new jobs were largely part-time positions, contributing to a total of 63,800 net positions gained. This surge in part-time employment, which rose by 48,000 jobs, was accompanied by a seasonal spike in education jobs. Despite the increase in job creation, the unemployment rate held steady at 5.5% due to robust population growth.
However, the rise in employment did not translate into more hours worked overall; total hours worked actually fell by 0.2%. The employment rate increased to 62%, while average hourly wages rose by 5% year-over-year.
The job market's performance varied across industries and regions. There were job losses in finance, insurance, real estate, and construction sectors. In contrast, Quebec and British Columbia saw job increases, while Alberta experienced job decreases.
TD Economics suggested that these figures are leading markets to prepare for a potential 25-basis-point rate hike. However, BMO Economics pointed out that much of the strong employment growth, which stood at 2.8% over the past year, is due to part-time work.
The U.S. Labor Department reported a similar trend with 336,000 jobs added in September. Interest rate probabilities based on swaps markets predict a near 40% chance that the Bank of Canada will raise its policy rate this month.
The bank will also consider whether the recent increase in inflation rate, partly due to higher fuel prices, is worrisome enough to raise interest rates again despite the recent stall in economic growth. Desjardins Securities suggests that the global rise in bond yields may give the Bank of Canada leeway to hold rates steady as consumers pull back on spending due to higher borrowing rates.
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