Yahoo Finance Canada adds 64,000 jobs in September, wages continue to drive higher
Job growth comes amid highest rate of population growth since 1957
Canada added 63,800 net jobs in September and the unemployment rate remained steady at 5.5 per cent for the third month in a row, Statistics Canada reported on Friday, as the country's population continues to surge.
While the increase was triple what analysts had expected, some economists say that it is not enough to take the Bank of Canada off the sidelines yet and re-engage in its tightening cycle.
"September's headline employment gain may have blown past consensus expectations, but weakness under the hood should limit its implications for the Bank of Canada as we head towards its next rate decision," CIBC economist Andrew Grantham wrote in a research note on Friday. He noted that the increase in jobs "was not exactly broad-based."
Gains in total employment were led by a 66,000 increase in jobs in the education space, an outsized seasonal spike which helped offset declines in other sectors. Employment was also up in transportation and warehousing, while there were declines in the finance, insurance, real estate, rental and leasing and construction sectors.
Analysts polled by Reuters had forecast a gain of 20,000 jobs, and for the unemployment rate to edge up to 5.6 per cent from 5.5 per cent in August.
Average hourly wages increased 5 per cent annually in September, following a rise of 4.9 per cent in August, something BMO chief economist Douglas Porter says "will very much keep the Bank of Canada on edge."
"The fact that overall employment is up 2.8 per cent in the past year and average wages are rising 5 per cent year-over-year means that labour income is still powering ahead. In turn, that suggests the economy is not seriously buckling, yet," Porter said in a research note on Friday. Still, he says the headline job growth "overstates the strength of the labour market", pointing to the spike in education jobs.
"We don't believe this is enough to tip the scales for the Bank of Canada, but it will keep their tightening bias firmly in place," Porter said.
Money markets hiked bets for a rate increase later this month after the jobs figures were published. They now see about a 38 per cent chance for a hike later this month compared to a 28 per cent chance before the data was released.
Desjardins' managing director and head of macro strategy Royce Mendes also says the September reading "is weaker than the headline suggests."
"The rapid pace of increase in the size of Canada’s working age population has meant that the labour market hasn’t tightened all that much in recent months, despite some heady gains in employment," he wrote in a research note.
Canada's labour market growth has been supported by strong population growth.
"The upward trend in employment continues to occur in the context of the highest rate of population growth since 1957," Statistics Canada said in its data release on Friday. The agency said the population of people aged 15 and older increased 82,000 in the month of September.
Canada's employment rate, or the proportion of people aged 15 and older with jobs, increased 0.1 percentage points to 62 per cent in September. The data agency has said that, given the pace of population growth, 50,000 jobs would have to be added per month in order to maintain the employment rate.
With files from Reuters.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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