It will be difficult to cap inflation with wage growth at 5%: senior economist
Canadian employment grew more than expected for a fifth straight month, again defying expectations for a coming economic slowdown.
The country added 41,400 jobs in April, all in part-time work, while the unemployment rate held near a record low at 5 per cent, where it’s been since December, Statistics Canada reported Friday in Ottawa. The figures beat expectations for a gain of 20,000 positions and a jobless rate of 5.1 per cent, according to the median estimate in a Bloomberg survey.
Bonds dropped. The 2-year Canada yield shot up about 8 basis points to 3.686 per cent at 8:40 a.m. Ottawa time.
After an unexpectedly strong start to the year, Canada’s jobs market is still showing momentum in the second quarter, with few signs of weakness in the wake of the Bank of Canada’s aggressive increases to interest rates. The gain adds to the more than 200,000 jobs filled or created during the first three months of 2023, a spike in employment many economists think accompanied a short rebound before growth stalls later this year.
Friday’s report follows gains of 21,800 and 34,700 in February and March, respectively, and marks the eighth consecutive month of job creation, bringing total employment gains since September to 423,900. That’s the longest uninterrupted streak of job gain since 2017.
Consistently hotter-than-expected job gains, coupled with sticky underlying price pressures, could bring the Bank of Canada off the sidelines, after officials held rates at 4.5 per cent for two straight meetings. This is the only jobs report between the central bank’s April 12 decision and its next one on June 7.
“We’re now over a year into the Bank of Canada’s rate hike cycle,” Brendon Bernard, an economist at Indeed Canada, said on BNN Bloomberg Television. “Overall, big picture, the rate hikes aren’t really showing up in these jobs numbers.”
During deliberations ahead of the last decision, policymakers considered raising borrowing costs, with stronger-than-expected growth and still-elevated core inflation cited as possible justifications. But officials opted to stand pat, in part because they expect both the labor market and consumer prices to cool in the months ahead.
Governor Tiff Macklem said Thursday that the jobs market remains tight and that wage growth needs to moderate in order to rein in inflation. While he reiterated a willingness to hike again if needed, he also said renewed global banking distress could alter the path of rates in Canada.
The persistent tightness of the labor market is adding pressure to workers’ compensation, with wages increasing more than 5 per cent for a third straight month. Policymakers have stressed that wage pressures of that magnitude aren’t consistent with getting inflation back to target unless matched by strong productivity growth, which has been declining.
In April, total hours worked rose 0.2 per cent on a monthly basis and were up 3.8 per cent compared to a year earlier. The participation rate held steady at 65.6 per cent.
Since February, monthly employment growth has averaged 33,000. The employment rate — the share of the population aged 15 and older who are employed — held steady at 62.4 per cent, as job gains kept up with the pace of growth in the labor force, which has been supported by high levels of immigration.
Job gains were led by increases in wholesale and retail trade, as well as transportation and warehousing. Employment rose in Ontario and Prince Edward Island, while it declined in Manitoba and was little change in other provinces.