The Canadian economy started the year with a flurry of new jobs, but the underlying details were decidedly mixed, with hiring concentrated in the public sector and in part-time work.
Employment rose by 37,300 in January and the unemployment rate fell a tick to 5.7 per cent, the first decline in just over a year, Statistics Canada said Friday in a report. Financial analysts were expecting an increase of 15,000 jobs last month, after a tepid gain in December.
Despite the increase, the employment rate has fallen for four consecutive months, because job growth isn’t close to offsetting a surge in population. Over the past year, employment has risen by 345,000, while the population aged 15-plus has jumped by one million.
In large part, the unemployment rate managed to fall in January because a smaller proportion of people were participating in the labour market.
While there were negative aspects to Friday’s report, analysts said the Bank of Canada is unlikely to lower interest rates before June, given rising employment and hot wage growth.
“The employment data suggests that June is now more likely for the first Bank of Canada rate cut of this cycle than April,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a client note. “That said, recent announcements of layoffs at major companies across industries in Canada still suggest that the economy is set for a bumpy ride as the past effects on high interest rates continue to weigh on activity.”
The entirety of job creation in January was in the public sector and in part-time work, which rose by 47,600 and 48,900 positions, respectively. Despite those part-time roles, the number of hours worked across the economy increased 0.6 per cent during the month.
There was a strong divergence at the industry level. Employment rose by more than 31,000 in wholesale and retail trade, whereas it fell by roughly 30,000 in the hospitality industry. The finance, insurance and real estate industry enjoyed a robust month of hiring, with more than 28,000 new jobs. Educational services added another 27,700 roles.
Wages are continuing to grow quickly. The average hourly wage rose 5.3 per cent on a year-over-year basis, down slightly from a 5.4-per-cent pace in December. The Bank of Canada has repeatedly flagged elevated wage growth as a challenge in bringing inflation back to its 2-per-cent target.
Statscan noted in Friday’s report that female youth labour participation had fallen to its lowest level in more than 20 years. The agency said there has been a “strong downward trend” since last February, which has seen the participation rate ebb to 62.5 per cent from 66.7 per cent over that time.
Participation rates have also been falling for young men, though not to the same degree. Statscan defines youth as people aged 15 to 24.
The decline in labour participation is accompanied by a rise in unemployment, “indicating that labour market conditions for youth have become more difficult in the past year,” Statscan said.
Meanwhile, the 15-plus population grew by nearly 126,000 in January, the largest monthly increase in Labour Force Survey records that date back to 1976. However, employers aren’t creating jobs at nearly the same pace. As a result, the employment rate has eased to 61.6 per cent from a recent high of 62.4 per cent early last year.
The labour market has softened in recent months – highlighted by fewer job vacancies and a rising unemployment rate – as the economy adjusts to tighter lending conditions. The Bank of Canada’s benchmark interest rate sits at 5 per cent, the highest level since 2001.
The focus, however, has turned to when the central bank will start to lower interest rates, given marked progress in bringing inflation under control and a slowing economy. Many economists and investors had pencilled in the BoC’s April meeting as the potential start of rate cuts.
But a recent spate of strong economic data has forced them to revise their timelines. Interest-rate swaps, which capture market expectations about monetary policy, now point to the first BoC rate cut occurring in June or July.
On Friday, analysts at Desjardins and CIBC Capital Markets predicted one fewer quarter-point rate cut this year than they had previously.
Andrew Grantham, senior economist at CIBC, said in a research note that “today’s data confirm that the Bank won’t be in a rush to cut interest rates.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
