Canadian job growth accelerated in November after the expiry of some COVID-19 financial supports, an outcome that is causing analysts to anticipate earlier Bank of Canada rate hikes.
The labour market saw a net gain of 153,700 positions last month, blowing past expectations on Bay Street, where the median estimate from analysts was an increase of 38,000 jobs. The unemployment rate tumbled to 6 per cent from 6.7 per cent, Statistics Canada said in a report Friday, just 0.3 percentage points shy of the rate when COVID-19 started.
It was the sixth consecutive month of job growth. With November’s gain, roughly 186,000 more people were working than in February, 2020, when COVID-19 escalated and led to millions of layoffs.
Friday’s labour report included several milestones. The total number of hours worked across the economy returned to prepandemic levels for the first time. And Statscan noted that 80.7 per cent of women aged 25 to 54 were employed, a record high.
After the report, several analysts said the Bank of Canada may be forced to raise its key lending rate – now at a record low of 0.25 per cent – sooner than previously expected.
“The labour market recovery is quite robust, and perhaps that means we don’t need as much monetary stimulus as we’ve been receiving,” said Sri Thanabalasingam, senior economist at Toronto-Dominion Bank. His group is still predicting an initial rate hike in April, but the risk of a move in January has risen, he added.
Friday’s numbers are “enough to say that the Bank of Canada is positioned for a rate hike before the middle of next year,” said Royce Mendes, senior economist at CIBC Capital Markets. “Just looking at the way the labour market has evolved to this point, there’s clearly less need for stimulus in 2022.”
Hiring in November was largely driven by the private sector, with gains roughly split between full-time and part-time positions. Most of the additions were in services-producing industries, such as health care and retail. Ontario set the pace for the provinces with a gain of 68,100 jobs, followed by Quebec at 45,500 and Alberta at 15,400.
The bulk of COVID-19 financial assistance for businesses and households ended in late October, including the Canada Recovery Benefit, which provided jobless benefits to those who didn’t qualify for Employment Insurance. (The federal government has brought in targeted assistance for the coming winter months.)
“It’s not too difficult to draw the line between expiring fiscal support and increased hiring activity,” Mr. Thanabalasingam said.
Throughout the economic recovery, many Canadian employers have found it challenging to fill positions. There were roughly one million job vacancies across the country in September, about double the volume at the start of the year. Labour demand is especially high in hospitality, retail and health care.
Statscan said that tight conditions in the labour market are similar to those in the summer of 2019, when the unemployment rate was at a record low and wages started to accelerate.
“These conditions are likely to contribute to new or worsening imbalances in provincial, regional and local labour markets, including shortages of specific skills, or geographic mismatches between vacant positions and available workers with the skills to fill them,” the agency said.
The situation is affecting recruitment. Friday’s numbers show wages are climbing faster for new employees than those with longer job tenures, a sign that employers are hiking pay to fill positions. Furthermore, employers appear to be relaxing their educational requirements for jobs, perhaps opting for more on-the-job training.
In November, around 44,000 positions were added in health care, making it the top industry for job growth. However, employment was little changed in accommodation and food services, prolonging that industry’s troubles. Roughly 200,000 fewer people are working in hospitality than when COVID-19 started.
For its November report, Statscan surveyed households on their work conditions between Nov. 7 and 13. As a result, the impact of devastating floods on B.C. employment could materialize in next month’s report.
The Bank of Canada has signalled that it could start to raise interest rates as soon as April of next year. Bond markets are pricing in five rate hikes in 2022, which would take the bank’s benchmark interest rate to 1.5 per cent.
However, the “big caveat” in rate-hike assumptions is how the Omicron variant of COVID-19 will evolve and potentially affect the economy, Mr. Mendes said.
“The impact of Omicron is creating extremely wide uncertainty ... around any base-case forecasts for the next few months,” he said.
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