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Economic News

Canada: A Surprise Drop in March Hiring May Signal a Shift in the Labour Market

April 5, 2024
Randall Bartlett
Senior Director of Canadian Economics


  • The Canadian labour market shed 2.2K net jobs in March—the first monthly decline in employment since July 2023. This helped to push the unemployment rate higher—to 6.1% from 5.8% in February—to reach the highest level since January 2022. Total hours worked declined relative to the prior month and are now up just 0.7% from a year earlier. The decline in hours was widespread in March, underscoring the breadth of the weakness. Similarly, only Ontario and BC saw job gains in March. At the same time, averagehourly wages were up 5.1% y/y, a tick higher than February’s 5.0% pace. Table 1 summarizes key data points.
  • There was not much change in our Q1 2024 real GDP growth tracking after the release, which is coming in at a solid 2.5% to 3% annualized. That’s light years above the 0.5% forecast by the Bank of Canada in January.


While one month doesn’t make a trend, March may signal the start of the long-anticipated slowing in the Canadian labour market. On a year-over-year basis, population ages 15 and over increased by 3.2%—the fastest pace since the survey data are available back to 1976. When combined with the unexpected drop in employment in the month, the employment rate edged a tick lower to 61.4%—the lowest level since the start of 2022. While this trend of hiring falling short of population gains isn’t new (graph 1), the gap continues to widen, thereby putting upward pressure on the unemployment rate. 

Despite the weakness in hiring, wage growth remains elevated in Canada. While off its recent high reached in December 2023, it’s still outpacing inflation by a wide margin (graph 2). The Bank of Canada (BoC) tracks permanent employees’ wages to measure signs of possible wage-push inflation, which edged higher in March along with average hourly wage growth. The BoC has been clear that it is looking for progress on wage growth in considering when to begin reducing interest rates. As such, while the lower level of employment and higher unemployment rate will be an important consideration in the run up to the April rate decision next week, the Bank will likely highlight that more progress needs to be made on wages. That said, the Bank shouldn’t ignore other wage measures, from National Accounts data and from the Survey of Employment, Payrolls and Hours, which have shown more encouraging signs of cooldown.

Overall, we remain of the view that the Bank of Canada will begin reducing its policy rate in June of this year. Lower inflation in the first quarter of 2024 than the Bank anticipated in its January 2024 MPR (2.8% y/y to date versus 3.2%) will likely hold a lot more weight in what the Bank telegraphs next week than LFS wage gains through March, particularly against the backdrop of broader labour market weakness. Further, the anticipated slowing in the Canadian economy in the next couple of years as a result of the federal government’s plans to reduce non-permanent resident admissions External link. and impending mortgage renewals will likely weigh heavily on the BoC’s future rate decisions. 

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.