The strength of the labor market in January surprised all observers, who had expected a decline or stagnation in job creation in the country. Instead, the Canadian economy added 150,000 jobs last month, and the unemployment rate held steady at 5%, near its historic low.
With 47,400 more jobs, the labor market is showing no sign of weakness either in Quebec, where the unemployment rate has fallen back below the 4% threshold. At 3.9%, Quebec’s unemployment rate is the lowest of all Canadian provinces.
Employment in Quebec is up for a third consecutive month. In the Montreal metropolitan area, employment was little changed, and the unemployment rate remained stable at 4.6% in January.
In Canada, as in the United States, where more than 500,000 jobs were created in January, the resilience of the labor market continues to surprise. Job creation continues despite high inflation and successive interest rate hikes, thwarting economists’ forecasts.
“The labor market is giving absolutely no signal of stress,” commented Bank of Montreal chief economist Doug Porter following the release of the latest Statistics Canada figures.
According to Sébastien Lavoie, Laurentian Bank’s chief economist, the scarcity of labor certainly encourages employers to keep their employees. “Most companies have recently posted strong balance sheets and rising profits,” he observes.
Green indicators
In addition to the unemployment rate, which remains at a very low level, the other labor market indicators monitored by the Bank of Canada are also positive, according to Statistics Canada.
The jobs created in January are both full-time and part-time. Employment increased in both the private and public sectors. Total hours worked rose 0.8% in January and are up 5.6% year over year.
The size of the labor force continues to grow, as 153,000 more people entered the labor market in January, pushing the participation rate up 0.3 percentage points to 65.7% . The increase in the active population is observed above all among women, as well as among people of both sexes aged 55 and over.
Sharp increase in wages in Quebec
The average hourly wage continues to grow, although at a slower pace. The increase was 4.5% in January, once morest 4.8% in December. Average wages are down in Ontario, but in Quebec, where labor shortages are more acute, annual average hourly wage growth accelerated in January, to 6.9% from 6.7% in December.
The number of job vacancies was down slightly in Canada and Quebec at the end of 2022, according to Statistics Canada. In Quebec, there were 246,230 unfilled positions following three quarters, or 6.1% of total jobs, which is one of the highest rates in the country.
Grain to grind for the Bank of Canada
This “explosive” start to the year on the job market complicates the task of the Bank of Canada, according to Marc Désormeaux, economist at Desjardins. The January data “does not suggest the easing of the economic trajectory usually necessary to allow inflation to be brought under control”, he believes.
Again this week, the Governor of the Bank of Canada explained that the current pace of wage growth would not bring inflation back to the 2% target.
On January 25, the central bank decreed a pause in the rise in interest rates and specified that it would wait for “an accumulation of data” before deciding what to do next. A single month’s data should do little to change its intention to give the economy time to adjust to the eight rate hikes in the past 11 months, most economists say.
Widespread increases
Ontario (+63,000), Quebec (+47,400) and Alberta (+21,000) were the provinces that added the most jobs in January.
Job creation has been widespread across almost all industries, but is particularly concentrated in wholesale and retail trade, health care and educational services.
Construction employment is on the rise, despite the slowdown in the real estate sector. The construction sector counted 16,000 more jobs in January, following an increase of 27,000 in December. Over the past year, construction employment has increased by 7.6%, making it one of the sectors with the strongest annual growth, according to Statistics Canada.
For the first time since March 2020, the transportation and warehousing sector declined and reported 17,000 fewer jobs in January.