The labour market is showing no signs of the slowdown the Bank of Canada is hoping for to get inflation down to two per cent, something economists say could force the central bank to get off the sidelines and raise rates again.
Statistics Canada’s latest labour force survey revealed Friday the economy continued to add jobs in April while wage growth outpaced inflation.
Employment rose by 41,000 jobs in April, but with all the gains made in part-time work.
Meanwhile, the unemployment rate held steady at 5.0 per cent for the fifth consecutive month. That’s just above the all-time low of 4.9 per cent reached last summer.
In a client note sent out Friday morning, BMO chief economist Douglas Porter said the latest jobs report once again shows “no evidence that the labour market is softening at all.”
“If this persists through the spring, the Bank of Canada may yet be forced to rethink its rate pause, especially with the housing market showing signs of reviving.”
The Bank of Canada paused its interest rate hiking cycle earlier this year, encouraged by slowing inflation. With its key interest rate sitting at 4.5 per cent, higher borrowing costs should force people and businesses to pull back on spending, and employers to rethink their hiring plans.
But so far, the labour market has remained resilient, despite previous forecasts for the economy predicting a slowdown to start the year.
The central bank has been warning that a tight labour market will make it more difficult to get inflation back to its target of two per cent, as higher wages could put upward pressure on prices.
TD director of economics James Orlando said the details in the jobs report are “mixed.” The economy continued to add jobs, but only part-time work. Moreover, population growth has been propping up employment numbers for months as Canada welcomes more immigrants.
And although the unemployment rate hasn’t budged, Orlando said there are signs that hiring isn’t happening as broadly in the economy.
“In the last three months, we went from almost 90 per cent of sectors hiring to 69 per cent of sectors hiring right now,” he said.
The job gains in April were led by the wholesale and retail trade industry, while the largest losses occurred in business, building and other support services.
The tight labour market is also putting upward pressure on wages. Average hourly wages were up 5.2 per cent on a year-over-year basis, growing faster than inflation.
The annual inflation rate in March was 4.3 per cent and is expected to fall to about three per cent by mid-year.
High wage growth is pushing the Bank of Canada to remain hawkish in its communications on monetary policy, even as it holds its key interest rate steady.
During a speech on Thursday at the Toronto Region Board of Trade, Bank of Canada governor Tiff Macklem addressed the labour market tightness.
“Most wage growth measures remain around the four to five per cent range. Unless productivity growth surprises us with a strong increase, persistent wage growth in that range will make it difficult to achieve the two per cent inflation target,” Macklem said.
Last month, the Bank of Canada’ governing council discussed raising rates again, but opted to remain on hold.
Orlando said if the economy continues to resist the slowdown the Bank of Canada is trying to engineer, interest rates may not be high enough.
“Maybe the Bank of Canada has to reassess what the proper level or the policy rate is to actually bring the economy to the economic slowdown that’s needed to get inflation back (down),” Orlando said.
This report by The Canadian Press was first published May 5, 2023.
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.
