Canada’s unemployment rate rose to 5.7% last month as job opportunities became fewer in an economy undermined by high interest rates.
In its labor force survey for the month of October, Statistics Canada reported Friday the creation of 18,000 jobs, but this figure was not enough to prevent the unemployment rate from increasing, while the pace of job creation follows that of population growth.
The unemployment rate in Canada stood at 5.5% in September.
October’s rise in the unemployment rate was the fourth in the last six months, and it adds to other data points that appear to favor a pause in interest rate hikes for the Bank of Canada, analysts said. economists.
“While job creation has been uneventful, make no mistake: the underlying conditions in the Canadian labor market are softening,” wrote Douglas Porter, the Bank’s chief economist. of Montreal, in a note to its clients.
Employment increased last month in the construction sector and the information, culture and recreation sector, but this increase was offset by declines in the wholesale and retail trade sector and the manufacturing sector. the making.
Employment increased in four provinces last month, including 1.7% in Nova Scotia and 0.6% in New Brunswick. In Alberta and Saskatchewan, the gain was 1.5%.
In Quebec, employment fell 0.5% with the disappearance of 22,100 jobs, and the province’s unemployment rate rose 0.5 percentage points to 4.9%. In Ontario, the picture has essentially not changed.
Canadians’ wages continued to grow rapidly, but less quickly than last month compared to September, with the average hourly wage increasing 4.8% to $34.08 compared to the same month last year.
More difficult to find a job
The Bank of Canada has chosen to keep its key interest rate at 5% in its last two monetary policy decisions, largely due to growing evidence that the economy is feeling the impact of the hike. rates.
Gross domestic product data showed the economy contracted in the second quarter and a preliminary estimate released earlier this week by Statistics Canada indicates another contraction took place in the third quarter.
The labor market has remained relatively resilient since interest rates began rising in March 2022, with employers maintaining their appetite for hiring post-pandemic. But the number of job vacancies has declined this year and Friday’s report projects job prospects will continue to weaken.
Among Canadians who were unemployed in September, a greater proportion were still unemployed in October than 12 months earlier, suggesting that “job seekers are having more difficulty finding work than ever before.” one year,” argued the federal agency.
Job opportunities are expected to become even scarcer as the effect of previous rate hikes increasingly ripples through the economy.
“The Bank of Canada should under no circumstances increase [les taux] again, given everything we currently know,” said James Orlando, director of economic affairs at TD Bank. “We think they have done enough. And they should just […] stay still now and [laisser] the economy continues to slow. »
The unemployment rate has already increased by 0.7 percentage points this year, and Orlando points out that TD Bank expects it to rise to 6.7% in 2024.
“The 0.7 percentage point adjustment is significant and goes in the right direction in terms of balancing the economy. But there is still much to do,” said Mr. Orlando.
Although the Bank of Canada has not completely closed the door to further rate hikes, its governor, Tiff Macklem, has made it clear that the central bank does not want to raise rates more than necessary.
At a hearing before a Senate committee this week, Mr. Macklem said the bank chose to keep rates steady in part because it expected a wave of mortgage renewals to further cool the rate. ‘economy.
Canadians who renew their mortgage with higher interest rates are forced to adjust their budgets accordingly, slowing their spending on goods and services.
The Bank of Canada hopes that this decline will slow inflation and bring it back to its target of 2.0%.
Annual inflation has slowed significantly so far, from a peak of 8.1% to 3.8% in September.
But rising borrowing costs pose a new challenge for families, as the cost of basic necessities continues to rise rapidly.
In October, Statistics Canada reported that one in three Canadians reported living in a household that had difficulty or great difficulty meeting their financial needs for transportation, housing, food, clothing and other necessary expenses during the previous four weeks.
While this proportion is down slightly from a year ago, it is still significantly up from October 2020, when about one in five Canadians reported the same.