The jobs keep coming

A week on from the startlingly robust US non-farm payrolls report for January, we learn that Canada's job market performed even more strongly in the same month. Statistics Canada reported this morning that the economy added 150,000 jobs in the month which,  given the relative size of the two economies, would be equivalent to a print close to 1.5 million for the US. The unemployment rate was unchanged at a near-record low of 5.0 percent as the labour force participation rate moved higher. 

The details of the report are uniformly strong. The bulk of the gains -- 115,000 jobs -- occurred in the private sector, and 121,000 of the jobs added in the month were full-time in nature. The gains were spread across a wide range of industries and well-distributed geographically, with only Newfoundland and Labrador posting a very small decline in employment. One possible caveat that might be worth keeping in mind is that there could be a seasonal adjustment issue here. Ontario and Quebec both posted very strong job gains, and both Provinces have had a less harsh winter than usual, which may have given some modest boost to employment in January. 

Given that the economy has now added 200,000 jobs in the space of two months, the trend in wage growth is perhaps the most surprising aspect of today's report. Year-on-year wage gains slowed markedly for a second consecutive month, to stand at 4.5 percent in January; this may be compared to the apparent cyclical peak of 5.8 percent recorded in November 2022.  

It was obvious that the FOMC knew about the non-farms data when it made its latest rate decision. Given the timing of StatsCan's survey, it is all but impossible that the Bank had any inkling of today's numbers before it announced its rate decision in late January.  Would it have made any difference? It very well might. Should it make any difference? That's a different question. A scenario in which employment is rising sharply while inflation falls and wage gains slow is entirely inconsistent with the Phillips curve framework that seems to underlie the Bank's policy stance. As I have suggested here before, it may be time for a rethink.