Despite gains, Canadian job market weaker than it looks

The Canadian economy added more jobs than expected last month, but with the gains driven by a seasonal spike in education employment and an increase in part-time work, economists say the job market is weaker than it looks.

Statistics Canada released its September labour force survey Friday morning, which shows employment rose by 64,000 jobs.

The unemployment rate continued to hold steady at 5.5% for the third month in a row.

“While the headline figures will be grabbing most of the attention, we’d caution on getting too excited. Almost all the gains were in the historically volatile education sector,” said TD director of economics James Orlando in a client note.

“Furthermore, most of the job gains were in part-time employment, causing the number of hours worked to decline. These details should throw some cold water on a seemingly hot jobs report.”

Canada’s labour market has cooled over the last year as interest rates have risen.

Still, the unemployment rate remains below pre-pandemic levels. It averaged 5.7% in 2019, the year before Covid-19 upended economic trends.

Strong population growth has also been supporting larger monthly job gains, as more people enter the labour force.

More people were working in educational services and transportation and warehousing. Meanwhile, jobs were shed in finance, insurance, real estate rental and leasing, information and recreation, and construction.

The Bank of Canada’s rate hikes since March 2022 are beginning to be felt in the Canadian economy as growth slows and job vacancies fall. The central bank’s key interest rate currently sits at 5% — the highest it’s been since 2001.

Higher interest rates are expected to continue weighing on the economy and affecting businesses’ appetite for hiring.

Despite these conditions, however, wage growth has outpaced inflation this year, making up for previous losses to price growth.

Average hourly wages in September grew 5% from a year ago, while inflation came in at 4% in August.

Economists say wage growth can be a lagging indicator of economic conditions, given workers tend to ask for higher wages to compensate for past cost-of-living increases.

Nojoud Al Mallees, The Canadian Press

Nojoud Al Mallees is a reporter with The Canadian Press, a national news agency headquartered in Toronto and founded in 1917.