Canada: September Jobs Spike Masks Pockets of Weakness, Inflationary Pressures Persist
- Net total Canadian employment rose by 64k in September 2023, marking a second consecutive monthly increase. The unemployment rate held steady at 5.5% for the third month in a row. Table 1 summarizes key data points.
- Despite the strong headline number, our tracking still only suggests roughly flat real annualized GDP growth in the third quarter of 2023. That remains well below the Bank of Canada’s latest projection of a 1.5% advance.
The headline jobs figure continues recent positive momentum, but a look under the hood reveals some weakness. This time, the jump in employment was concentrated in part-time jobs, while private sector hiring mustered only a tiny increase following two consecutive drops. Moreover, much of September’s strength relates to a bounce-back in education sector positions. We’ve previously highlighted that these are subject to significant month-over-month volatility because of their seasonal adjustment factor, so the rebound likely does not reflect strength in the underlying labour market. At the same time, hours worked edged lower in the month. Despite the boost to the Canadian labour force, the September print doesn’t meaningfully change our Q3 GDP tracking (though it does provide a decent handoff for Q4).
More troubling was the third consecutive acceleration in the growth in permanent employees’ wages. The Bank of Canada tracks this indicator closely to assess possible wage-push inflation. We continued to observe an upward trend across many sectors.
Although the rate of monthly population expansion cooled across the country in September (graph), it continues to outpace job creation by a significant margin. Over time, strong headcount gains should help increase the supply of available workers—particularly with immigrant labour market integration improving—and that can help ease labour market tightness and potential wage-push inflation. But in the current context, the surge in headcount gains risks boosting on demand for goods and services, and by extension generating further upward price pressures.
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