A strong pace of wage growth indicates the tight labour market continues: Senior economist
The economy added 21,800 jobs in February while the unemployment rate held at 5 per cent, near a record low, as the number of employees grew in the private sector, Statistics Canada reported Friday. The figures beat expectations in a Bloomberg survey of economists for a small increase of 10,000 positions and a jobless rate of 5.1 per cent.
The robust jobs market continues to defy expectations and may test the Bank of Canada’s commitment to pausing its interest-rate hiking cycle. Nevertheless, benchmark government yields plunged amid broader global concerns about financial distress at SVB Financial Group.
Friday’s report follows gains of 150,000 and 69,200 in January and December, respectively, and marks the sixth consecutive month of job creation, bringing total employment gains since September to 348,000. It’s the first of two labour force surveys that will be key inputs for policymakers ahead of the Bank of Canada’s next rate decision on April 12.
“Arriving on the heels of the January jobs jamboree, this result is far too strong for the BoC’s comfort. There simply is no sign that the labour market is succumbing whatsoever to the rapid-fire tightening of the past year,” Douglas Porter, chief economist at Bank of Montreal, said in a report to investors.
“The economy is likely just one wrong turn on the inflation front away from the bank flipping back into rate-hiking mode,” Porter added.
Governor Tiff Macklem and his officials kept borrowing costs unchanged for the first time in nine meetings on Wednesday, but they still see labour market as “very tight” and employment growth “surprisingly strong.” Policymakers are closely watching economic developments, including jobs data, to assess whether their 425 basis points of rate increases to 4.5 per cent is enough to cool the economy and bring inflation to heel.
The latest employment data add to a mixed picture for the Canadian economy. Fourth-quarter growth came in weaker than expected, but the labour market continues to churn out jobs even with weakness in rate-sensitive sectors like housing.
In the US, employment decelerated by less than expected, but unemployment jumped and wage growth slowed to the weakest pace in a year, according to data also released Friday.
In Canada, the persistent tightness of the labour market is still adding pressure to worker compensation. Wages for permanent employees rose 5.4 per cent, the highest since November. Policymakers view wage pressures running in the range of 4 per cent and 5 per cent as inconsistent with getting inflation back to the 2 per cent target, unless matched by strong productivity growth.
In February, total hours worked rose 0.6 per cent on a monthly basis, and were up 1.4 per cent compared to a year earlier, adding to evidence of sustained economic momentum in the first quarter.
The participation rate was unchanged at 65.7 per cent, as marked increases among core-age women and women aged 55 to 64 helped boost the overall rate and offset the downward pressures of an aging population in recent months.
Employment increased in Newfoundland and Labrador, New Brunswick, Prince Edward Island, and Manitoba, but declined in Nova Scotia and was little change in other provinces.
Job gains were led by health care, public administration and utilities.
Statistics Canada will release February inflation numbers on March 21, and March jobs data on April 6.