October's gains surprised, but volatility tempers calls for further rate cuts
Canada’s labour market delivered a jolt of optimism in October, with employment surging by 67,000 and the unemployment rate dipping to 6.9%.
The data, which followed a similarly strong September, has prompted economists to predict the Bank of Canada will keep its policy rate unchanged in the near term, even as underlying signals remain mixed.
October’s rebound—driven by private sector hiring and notable gains in manufacturing, transportation, and retail—offset job losses seen over the summer.
“The data reported this morning erred more towards outright improvement,” Nathan Janzen, assistant chief economist at RBC, said.
“Job growth was concentrated in the private sector, improvement in the most trade-exposed manufacturing and transportation sectors, wage growth accelerating, and the labour force participation rate rising.”
Janzen cautioned, however, that the figures are “notoriously volatile, arguing against reading too much into any one report.”
He added, “The data is consistent with our own base case projections that the BoC will not cut interest rates further.”
Wage growth picked up, with average hourly earnings for permanent employees rising 4.0% year-over-year, up from 3.6% in September. Yet, most of October’s job gains were part-time positions, and total hours worked fell for the second consecutive month, partly due to temporary labour disputes, including the Alberta teachers’ strike.
Economists urge caution on quality of gains
While the headline numbers beat expectations, several economists flagged underlying softness.
“Canada heaped on more jobs of fairly low quality, drove the unemployment rate down, recorded supercharged wage growth and a temporary drop in hours worked. If you believe it,” Derek Holt, head of capital markets economics at Scotiabank, said in a note.
“All of which vindicates—at least for now—the BoC’s clear hold signal and the Carney administration’s resistance against heaping on cyclical stimulus.”
Kari Norman, economist at Desjardins, noted, “October’s hiring spree was driven by part-time work (85.1k), masking a decline of 18.5k full-time positions.” She added that they "expect the Bank of Canada to keep rates on hold for the foreseeable future.”
For Leslie Preston, managing director and senior economist at TD Economics, the latest jobs data will make the Bank of Canada "more comfortable to sit on the sidelines and let the 275 basis points of rate cuts in this cycle work their way through the economy.”
Outlook: Rates on hold as BoC waits for clarity
“The Canadian labour market appears to be recovering, although truer tests of the strength of that recovery are still to come given the recent volatility seen in this data release,” Andrew Grantham, senior economist at CIBC Capital Markets, said.
“We expect that employment gains will slow down again but, with population growth also decelerating, the unemployment rate should continue a gradual move lower during 2026.”
October’s jobs data offered a welcome reprieve from recent softness, but volatility and mixed quality in employment gains mean the Bank of Canada is likely to stay the course—holding rates steady as it waits for clearer signals on the economy’s trajectory.
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