Labour market rebound fuels expectations for a December hold on interest rates
Canada’s labour market delivered another surprise in October, adding 67,000 jobs and pushing the unemployment rate down to 6.9%, according to Statistics Canada.
This marked the second consecutive month of robust employment growth, offsetting the losses seen during the summer and suggesting that the job market is stabilizing after a period of volatility.
The October increase was driven almost entirely by part-time positions, which jumped by 85,000, while full-time jobs declined by 18,500. Ontario led the way with 55,000 new jobs, particularly in retail, transportation, and recreation sectors.
Wholesale and retail trade alone contributed 41,000 positions, and transportation and warehousing added 30,000. In contrast, construction employment fell by 15,000, reflecting ongoing challenges in goods-producing industries.
Private sector employment saw its first notable rise since June, up by 73,000, while public sector and self-employment numbers remained largely unchanged.
Youth employment also improved for the first time since January, with 21,000 more jobs for those aged 15 to 24. The youth unemployment rate dropped to 14.1%, its first decline since February, though it remains well below the highs recorded in early 2023.
Wage growth continued, with average hourly earnings up 3.5% year-over-year to $37.06. However, total hours worked edged down by 0.2%, partly due to labour disputes in Alberta that reduced work time for approximately 87,000 employees.
Despite the headline gains, the entirety of October’s job growth came from part-time work, and most industries outside services continued to shed positions.
Statistics Canada noted that cumulative gains in September and October (+127,000) have now offset the declines observed in July and August (–106,000), highlighting the recent volatility in the Labour Force Survey.
Impact on Bank of Canada rates
The stronger-than-expected jobs report is likely to influence the Bank of Canada’s next move. BoC recently trimmed its key overnight rate to 2.25%, marking its second consecutive cut and the lowest level since July 2022. However, the October data suggest that the current rate environment may be sufficient to foster job growth.
The drop in unemployment and steady wage gains provide evidence that further rate cuts may not be necessary in the near term. Market watchers now widely expect BoC to hold rates steady at its December meeting, as the labour market shows signs of resilience.
BoC's governing council previously signalled that the current policy rate is “about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.”
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