OTTAWA — After suffering three consecutive months of job losses and fueling fears of an economic slowdown, the Canadian economy posted a slight increase in employment in September, suggesting that the labor market is still exceptionally tense.
The unemployment rate for the month fell to 5.2% as fewer people searched for work, from 5.4% in August, Statistics Canada reported in its Labor Force Survey released on Friday. During this time, some 21,000 jobs have been added to the market.
Economists say the latest report shows employers are still keen to hire and wages are rising accordingly.
The report showed wages rose 5.2% in September from a year ago, with an average hourly wage of $31.67. It was the fourth consecutive month of wage growth of 5% or more, but still below the rate of inflation.
Indeed, Chief Economist Brendon Bernard said the recent wage increase “has been a long time coming.”
“The stronger wage growth we’ve seen is in response to soaring inflation and employers are at least partially offsetting the rising cost of living with higher wages,” Bernard said.
With the annual inflation rate hitting 7% in August, the Bank of Canada is monitoring the pace of wage growth once morest the risks of a wage-price spiral, where higher prices lead to higher wages and vice versa.
The rise in employment in September was expected as job losses in the education sector over the summer were reversed as schools reopened. The report says gains in education, health care and social assistance were offset by losses in several other sectors, including manufacturing and information, culture and recreation.
Unemployment also fell as Canada’s labor force participation rate — the percentage of people wanting and looking for work — edged down 0.1 percentage points in September.
Despite three months of job losses, the latest employment figures confirm that the labor market is still very tight, said TD economics director James Orlando.
“We still have a lot of vacancies, we still have an imbalance between labor supply and demand in Canada,” observed Mr. Orlando.
To help businesses address existing labor shortages and fill vacancies, Immigration Minister Sean Fraser announced on Friday that Canada will temporarily allow international students to work longer than 20 hours. per week.
In July, employers were recruiting for nearly one million jobs.
As the Bank of Canada continues to aggressively raise interest rates to rein in high inflation, the Canadian economy is expected to feel the effects in both economic growth and employment numbers.
The central bank has hinted that tight labor markets are partly responsible for high inflation.
“We are far from having solved this problem,” added Mr. Orlando.
Since March, the Bank of Canada has raised its policy rate from 0.25% to 3.25%, one of the fastest rate hike cycles in its history. With inflation still well above its 2% target, the central bank is expected to raise rates once more on 26 October.
As more parts of the economy begin to feel the calming effects of higher interest rates, TD predicts unemployment will hit 5.6% this year and later peak at 6.5% .
The report also looked at the retirement of Canadians under 65, a key factor in the apparent shortage of workers. Nearly one million Canadians aged 55 to 64 said they were retired in September.
Over the past 20 years, the labor force participation rate has steadily declined, mainly due to the aging of the population.
The federal agency said that since September 2019, the number of Canadians aged 65 and over has increased by 11.6%, while the working-age population has increased by 3.5%.
Mr. Bernard explained that economic cycles were largely behind the tightening of the labor market, but that the trend of an aging population “is constantly in the background”.
As children returned to school in September, the report also looked at the effect of childcare responsibilities on career decisions. Despite record employment, women aged 25 to 54 with children under 16 were twice as likely to decide not to apply for a job or promotion in the past year as their male counterparts.
Women were also twice as likely as men to report helping their children with homework and homeschooling most or all of the time.
