Canada’s economy continues to generate jobs, but a massive influx of job seekers means the unemployment rate is drifting higher.
The country added almost 25,000 positions last month after an increase of 17,500 in October, Statistics Canada said Friday in a report. The gain was slightly stronger than expectations on Bay Street.
Yet the unemployment rate still ticked up to 5.8 per cent in November from 5.7 per cent in the previous month.
So far in 2023, the labour market has seen a net gain of about 430,000 positions – what is generally regarded as a robust year of job creation.
But the country is also growing at historically strong rates. Year to date, the population 15 years of age and older has risen by roughly 870,000, or 2.7 per cent, according to Statscan’s monthly labour survey.
And jobs are not being created at nearly the same pace at which newcomers are joining the labour force, so the unemployment rate is climbing – from 5 per cent at the outset of the year to the current 5.8 per cent.
“In a trend that we’re starting to get used to, employment rose, but slower than population growth,” said Brendon Bernard, senior economist at hiring site Indeed Canada, via e-mail. “Joblessness is still low by historical standards, but conditions have clearly shifted from the start of 2023.”
The labour market has softened a great deal in recent months. On Thursday, Statscan reported that job vacancies fell by about 40,000 in September and have tumbled 37 per cent since peak levels in 2022. The total number of vacant positions – roughly 632,000 – is the lowest since February, 2021.
The Bank of Canada has deliberately tried to take some steam out of the labour market with its inflation-busting campaign, which has seen the central bank raise its benchmark interest rate to 5 per cent from 0.25 per cent in early 2022.
It is widely expected to hold its key rate steady on Dec. 6, its final policy announcement of the year.
“As the lagged impacts of rate hikes continue to make their way through the economy, we expect further labour market weakness will drag down underlying inflationary pressures in the months to come,” wrote Royce Mendes, the head of macro strategy at Desjardins Securities, in a client note. “That should set the Bank of Canada up to begin trimming rates in the second quarter of next year.”
Friday’s Statscan report showed that average hourly wages rose 4.8 per cent last month on an annual basis, matching the increase in October. The Bank of Canada is closely watching wages for signs of inflationary pressure.
Total hours worked across the economy fell 0.7 per cent in November. This is a key metric for economic activity and portends a weak reading for gross domestic product that month.
Other details in the report were more encouraging. The number of private-sector employees rose by 38,000 last month, the first increase since June. Full-time positions jumped by nearly 60,000, offsetting a decline in part-time work.
Employment rose by about 28,000 in manufacturing and 16,000 in construction.
But other sectors are struggling to grow. Wholesale and retail trade posted a decline of nearly 27,000 positions in November, while there was a loss of roughly 18,000 jobs in finance, insurance and real estate. The latter industry has seen job losses for four consecutive months.
Statscan noted that unemployed people in November were more likely to have been laid off from their previous job as well than unemployed people in November, 2022. The agency also pointed out that younger Canadians (15 to 24) have experienced a sharper increase in unemployment than people in other age brackets.
Year to date, the number of unemployed people has increased by 197,000 to roughly 1.2 million. (Statscan considers someone unemployed if they are without a job and actively searching for work, are on temporary layoff or will start a job in the next four weeks.)
Andrew Grantham, senior economist at CIBC Capital Markets, said in a research note that the current trend of rising employment but even stronger labour force growth should drive the unemployment rate up to between 6 per cent and 6.5 per cent in the first half of 2024.
“At that time, the labour market should be loose enough and inflation low enough to allow the Bank of Canada to start cutting interest rates in the second quarter of next year, which should help stabilize the labour market in the second half of the year,” he said.