Choose your settings
Choose your language
Economic News

Canada: Employment Holds Up, but the Labour Market Is Still Weakening

March 8, 2024
Marc Desormeaux
Principal Economist


  • Net total Canadian employment posted another solid gain in February 2024, this time rising by 41k. The unemployment rate edged a tick higher to 5.8%, following a small decline in January. Table 1 summarizes key data points.
  • There was not much change in our Q1 2024 tracking, which still suggests real annualized GDP growth of between 1% and 1.5%. That’s more than the 0.5% advance forecast by the Bank of Canada in January.


Hiring continued in February. Not only did headline jobs advance again, but those gains were concentrated in full-time work while hours worked held steady. That said, as we’ve seen for most of the past year, private sector hiring continues to lag advances in the public sector. But most of the job gains came from self-employment, sending mixed messages about the health of the labour market, particularly against the backdrop of sharply higher business bankruptcies in January.

But the pace of employment growth remains a misleading indicator, as population gains once again outstripped net job creation (graph 1). The rate of Canada’s headcount increase set another record year-over-year increase and maintained a hefty monthly pace above 3% annualized. Against that backdrop, to maintain the employment rate, we would’ve needed to see roughly 65k jobs created last month. Consequently, the labour market is still softening despite a solid pickup in hiring.

By province, the trend of lagging employment growth is most apparent in Ontario (graph 2). But it’s also present in the other three largest provinces, albeit not to as great an extent. That said, in aggregate, other provinces aren’t experiencing this same trend.

As we’ve highlighted many times previously, skyrocketing population is a mixed economic bag. To the extent that it stimulates consumer demand and overall economic activity, there is a risk that it reinvigorates inflation in the short run. But labour shortages continue to present both shorter- and longer-run headwinds to Canadian growth. Given how much newcomer integration into the labour market has improved in recent years, there’s a case to be made that international migration can help fill job shortages, boost the labour supply and mitigate potential wage-push inflation over time.  

Easing wage gains (graph 3) in February are more positive for efforts to return inflation to its 2% target. The Bank of Canada (BoC) tracks permanent employees’ wages to measure signs of possible wage-push inflation. The year-over-year growth rate for this indicator fell for a second consecutive month and was below 5% for the first time since June of last year. That said, wage stickiness continues to present upside risk to inflation, and the BoC will need to continue to monitor this closely. Indeed, the Bank of Canada emphasized External link. the need to see further evidence that wage growth is moderating in its interest rate announcement on Wednesday. 

We remain of the view that the Bank of Canada will begin reducing its policy rate in the second quarter of this year. We still suspect that the central bank will put more weight on easing price pressures and falling job vacancies than on headline job gains and real GDP that are being propped up by surging population growth. And we’re still of the view that as Canadian consumers and businesses increasingly feel the full effects of prior increases in borrowing costs, it will prompt a less restrictive monetary policy stance starting in the middle of the year.

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.