Canada employment: still chugging along

This is a rarity: Canada released its November employment data today, a full week ahead of the scheduled release of the corresponding US data. Statistics Canada reported that the number of persons employed rose by 25,000 in the month, but with the labour force growing rapidly as a result of immigration, the unemployment rate edged up again, reaching 5.8 percent.

The composition of the job gains was moderately encouraging.  The manufacturing sector reportedly added 28,000 positions in the month, more than reversing the loss posted in October;  construction added 16,000, adding to the previous month's strong gain. These gains were partially offset by job losses across the service sectors. Moreover. the private sector more than fully accounted for all of the month's job gains. One all-too-familiar wrinkle in the data: the number of persons self-employed reportedly fell by 25,000 or almost 1 percent in the month. The extreme volatility in this series means it can never be fully trusted. 

Media coverage of the numbers has tended to suggest that the rising unemployment rate over the past several months reflects the slowing -- dare we say it, recession-threatened -- economy. This is only part of the story. The 25,000 increase in employment in November is admittedly below the monthly average seen over the past year, which is in excess of 40,000, but it is still a healthy gain by historical standards. The bigger issue is rapid growth in the labour force, driven by high levels of immigration. The labour force has grown by an average of over 60,000 per month over the past year. While the monthly rise in  November was a more modest 36.000, the increase in the supply of labour still outpaced the ability of the economy to create new jobs. This pattern is likely to continue for some time. 

The rising unemployment rate certainly supports the case for the Bank of Canada to keep rates on hold, and maybe even start dropping hints about easing conditions in the not too distant future. There is one small complication, however: average hourly earnings rose 4.8 percent in the year to November, a pace that is clearly not consistent with getting inflation all the way back to the 2 percent target. It would be no surprise to see the Bank make specific reference to this when it publishes its next rate decision on December 6.*

* Mea culpa -- I originally gave the date for the rate decision as December 11. That is in fact the correct date for the December 2024 meeting, so at least you are ahead of the game!