Yahoo Finance Canada's job market 'virtually unchanged' in December; unemployment rate remains steady
Canada's labour market added just 100 jobs in December and the unemployment rate held steady at 5.8 per cent, according to Statistics Canada, as the economy continues to slow.
The data agency said in a news release on Friday that total employment was "virtually unchanged" from November. The number of full-time jobs fell by 23,500 in December, while part-time employment increased 23,500.
The net gain of 100 jobs was less than what economists were expecting. Analysts polled by Reuters had forecast an increase of 13,500 jobs and for the unemployment rate to tick up to 5.9 per cent.
"Momentum in Canada’s labour market ground to a halt at the end of 2023," Desjardins managing director and head of macro strategy Royce Mendes said in a research note on Friday.
"In our view, the stagnation in employment, which follows sluggish GDP growth last year, suggests that the impacts of high interest rates are becoming more widespread across the economy."
The Bank of Canada aggressively hiked rates in the wake of high inflation, bringing its benchmark rate to 5 per cent, the level it has remained at for three consecutive decisions. Economists widely believe that the Bank of Canada is done with interest rate hikes, and that the central bank will soon begin to cut rates as the economy continues to show signs of weakening.
Statistics Canada says employment growth was slower in the second half of the year, averaging 23,000, compared to an average of 48,000 in the first half of the year.
In December, employment in the goods sector decreased by a net 42,900 jobs, driven by job losses in manufacturing, agriculture and construction. Those losses were balanced out by a net 43,100 positions gained in the services sector, led by increases in the professional, scientific and technical services as well as healthcare and social assistance.
At the same time, average hourly wage growth for permanent employees increased 5.7 per cent year-over-year, following an increase of 5 per cent in November, marking the highest growth rate in nearly two years. The Bank of Canada has said wage growth in the 4 per cent to 5 per cent range or higher would hinder its efforts to sufficiently cool inflation.
The labour force data "provided a classic mixed bag of results," CIBC economist Andrew Grantham wrote in a research note on Friday, and that it won't spur the Bank of Canada to cut rates yet. Bank of Canada Governor Tiff Macklem said in an end-of-year speech in December that the central bank needs to see evidence that "inflation is on a sustained downward track" before it can begin discussing cutting its benchmark rate.
"While a further decline in the employment rate is evidence that the labour market continues to weaken, the decline in participation and acceleration in wage growth suggest that it isn't loose enough for the Bank of Canada to cut interest rates quite yet," Grantham said.
BMO chief economist Douglas Porter says the "sluggish results suggest that the softening seen in the broader economy is finally catching up with the job market."
"Prior to December, employment gains had remained amazingly sturdy in the face of paltry GDP growth," Porter wrote in a research note.
"That may now be shifting. If so, this would suggest that the jobless rate is almost certain to head higher, pushing above 6 per cent in coming months."
Still, Porter expects the central bank "to be very patient on the rate-cutting front."
"For the Bank of Canada, the sticky wage strength, combined with the solid U.S. payroll results today, will more than offset the sluggish domestic job tally."
With files from Reuters.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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