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'The labour market is still hot' — what economists say about the numbers


Canadian employers barely hired enough in November to bring substantial job gains in the labour market, yet the unemployment rate dropped, Statistics Canada reported on Dec. 2.

Canada gained 10,000 jobs and the unemployment rate slipped from 5.2 per cent in October to 5.1 per cent in November.

The Bank of Canada keeps a close eye on wage growth to look for any signs of cooling in its efforts to ease inflation. Wages held steady in November at 5.6 per cent year-over-year after six consecutive months of increases.

Here’s what economists make of the numbers:

Nathan Janzen, assistant chief economist at Royal Bank of Canada

“Wage growth has accelerated substantially but is still running behind inflation. And the impact of Bank of Canada interest rate hikes has yet to fully be felt in the economy. Some early signs that broader inflation pressures have started to ease, and indications that domestic demand is softening, mean the BoC could be close to the end of the current interest rate hiking cycle. But we expect another 25 basis point hike to the overnight rate at next week’s central bank policy decision,” he said in a client note.

James Orlando, senior economist at Toronto-Dominion Bank

“The labour market is still hot. Following October’s mammoth jobs gain, we were expecting some stabilization in today’s report. With another 10 thousand jobs gained, and full-time work dominating the underlying figures, the labour market continues to heat up,” Orlando said in a note.


“Today’s report reinforced expectations that the Bank of Canada will continue hiking its policy rate at its meeting next week. With the rate likely to get to 4.25 per cent, the BoC will have undoubtedly reached restrictive territory. Though we haven’t seen it in the labour market data as of yet, the impact of the BoC’s aggressive moves will eventually cool the labour market. With the recent momentum, this is expected to take pace in mid to late 2023.”

Brendon Bernard, senior economist at Indeed Canada

“If the Bank of Canada is looking for easing labour market pressure to help cool inflation, we didn’t really see that so much in today’s report. Partially that is a good news story because it’s a sign that overall conditions remain pretty good for job seekers. But at the same time, it raises the stakes for global factors (such as commodity prices) to help bring inflation down,” Bernard said.

“Overall, I’d say this is almost a no-news-is-good-news report, at least from the headline numbers. We’re at a point in the economic cycle where the unemployment rate is already quite low and we’ve got uncertainty across the global economy, where things are just remaining resilient. At least for the time being, this is probably the best we can hope for, for now.”

Stephen Brown, senior economist at Capital Economics

“The concern for the Bank is that, despite the slowdown in employment growth, the unemployment rate nevertheless declined to 5.1 per cent, from 5.2 per cent, as the labour force contracted. The better news is that the jump in average hourly earnings in October was not repeated,” Brown said in a client note. “On balance, we still think the Bank will drop down to a 25 basis-point hike next week, but it will be a closer call than market pricing seems to imply.”

Douglas Porter, chief economist at Bank of Montreal

“There’s nothing here to obviously sway the Bank of Canada’s rate decision next week either way, but it’s quite clear that the labour market remains tight and in solid shape overall. The Bank has expressed concern about a possible acceleration in wage growth on many occasions, and the still-firm result here may keep them uneasy. We remain comfortable with our call for a 50 bp hike next week, with the combination of the surprisingly healthy Q3 GDP report earlier this week and a steady job report supporting that option,” Porter wrote in a client note.

Royce Mendes, head of macro strategy at Desjardins

“As a result of the only modest gain in headline employment and the absence of any signs of accelerating wage growth, we continue to expect the Bank of Canada to hike rates just 25bps next week,” Mendes wrote in a client note.

Derek Holt, Bank of Nova Scotia

“The Bank of Canada’s guidance that wage growth has peaked is wishful thinking as it underestimates pressures on the labour market that pose ongoing upside risk to price pressures on a smoothed basis over time going forward. Everyone naturally wants a pay increase given pressures on the cost of living but those gains are exceeding inflation and productivity and present the risk that either the cost of borrowing will push higher yet and/or stay higher for longer,” Holt wrote in a client note.

Matthieu Arseneau and Alexandra Ducharme, National Bank of Canada

“While this morning’s data was generally good, we continue to believe that the labour market will moderate in the months ahead. Historically, consumers have been astute in perceiving reversals in the labour market. The most recent data from the Conference Board tells us that optimism about the labour market outlook is fading, with the indicator essentially back to its pre-pandemic level after hitting all-time highs in 2021,” Arseneau and Ducharme wrote in a client note.

“Meanwhile, the most recent CFIB survey indicates that small businesses still perceive significant labour shortages, but that hiring intentions are fading. In fact, the number of firms planning to increase their workforce is similar to the number planning to reduce it, indicating a hiring freeze at the aggregate level. Even if mass layoffs are avoided, the strong population growth is likely to increase the unemployment rate in the months ahead. With one month to go in 2022, the population aged 15 and older has grown by 454K so far this year, the largest increase on record over the same period.”

Charles St-Arnaud, chief economist at Alberta Central

“The continued resilience of the labour market is likely to tilt the BoC in favour of bringing forward some of the expected tightening. As a result, we believe that the BoC will increase its policy rate by 50bp at next week’s meeting. At the moment, we believe this could mark the last rate increase of the current cycle. However, whether the BoC hikes further will depend on inflation and whether we see a confirmation that core measures are peaking,” St-Arnaud wrote in a client note.

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