A "Now Hiring" sign is seen at a FedEx location on Broadway on June 07, 2024 in New York City. Photo by Michael M. Santiago/Getty Images.
Canada's unemployment rate saw an unexpected decline in September, dropping 0.1 percentage points to 6.5%. This shift comes as the country added 46,700 jobs, surpassing economists' predictions. A Bloomberg survey had anticipated an increase in the unemployment rate to 6.7% alongside modest job growth of 27,000. This marks the first decrease in the unemployment rate since January.
The job growth was primarily driven by full-time positions, which increased by 112,000, while part-time jobs saw a decline of 65,300. The private sector played a significant role, contributing 61,200 new jobs, while the public sector experienced a loss of 23,600 jobs. The overall labor force grew by just 15,900, reflecting one of the smaller increases in recent months, even as Canada’s population has surged since the pandemic.
These figures suggest robust labor demand in an economy that might be benefiting from the Bank of Canada’s recent rate cuts. This report strengthens the Bank's case for continuing to gradually lower rates, raising hopes that inflation can be controlled without causing substantial job losses.
In financial markets, Canadian bonds fell after the report's release, leading to a rise in yields, with the two-year Canada benchmark yield reaching 3.15%. Meanwhile, the Canadian dollar improved, rising to a session high of $1.3725, ending a seven-day streak of losses against the US dollar.
Prior to the job report, traders estimated about a 50% chance of a 50 basis-point cut at the Bank of Canada’s next meeting on October 23. Former Bank of Canada deputy governor Paul Beaudry indicated earlier in the week that he would not be surprised by such a cut. RBC Dominion Securities has even predicted consecutive cuts of that magnitude this month and in December.
In September, policymakers, led by Governor Tiff Macklem, reduced the policy rate by 25 basis points for the third consecutive time, bringing it down to 4.25%. Macklem noted that the labor market trend shows employers are not hiring sufficiently to match labor force growth, warning that significant layoffs would raise concerns.
This latest jobs report should help alleviate those concerns ahead of the next rate decision. Inflation figures are also set to be released on Tuesday, and most economists surveyed by Bloomberg expect a 25 basis-point cut later this month.
Wage growth, however, slowed to 4.5% annually, down from 4.9%. The sectors of information, retail, and culture, along with wholesale and retail trade, led the job gains, while education, health care, and agriculture experienced the most significant job losses. Additionally, youth unemployment improved, falling to 13.5% from 14.5% the previous month, offering some relief to younger job seekers and newcomers who have faced challenges in the labor market this year.
