By Robb M. Stewart

OTTAWA–Hiring in Canada was unexpectedly strong in August, helping the jobless rate dip for the first time since January and signaling resilience that could keep the central bank on a cautious path toward lowering interest rates.

Canadian employers added 46,700 jobs last month after four straight months of little change, and the unemployment rate was 0.1 percentage point lower at 6.5%, Statistics Canada reported Friday. The pace of hiring was stronger than market expectations for the addition of a modest 27,500 and a forecast unemployment rate of 6.7%.

When calculated using U.S. Labor Department methodology, Canada’s unemployment rate fell to 5.4% from 5.6% in August, though the Canadian jobless rate was 1.3 points higher than in the U.S. for the latest month.

The increase in employment in Canada was driven entirely by full-time jobs, which increased by 112,000 and more than offset a fall in part-time work. Private-sector employment was strong, increasing for a second consecutive month and making up for a fall in public-sector roles.

The Bank of Canada, which has shown increased comfort in the cooling path of inflation, has in recent months been looking for signs lackluster economic growth is picking up. Some strength in the jobs data could rule out a bigger rate cut by the central bank at one of the two remaining policy meetings this year. Economists say a steeper rate cut is possible if signs of slack in the economy continue to build.

Much of the recent increase in unemployment has come from lengthier job-search times, particularly for students entering the job market or hunting for summer work. Employment gains for much of the year have failed to keep up with population and labor-force growth, but both lagged behind hiring in September.

Despite the gain in overall employment last month, the employment rate–the proportion of the working-age population that are working–dipped 0.1 percentage point to 60.7% in August. That rate has been trending lower since reaching a peak of 62.4% in the first two months of last year.

The labor-force-participation rate, the proportion of Canadians 15 and older who are employed or looking for work, also softened for a third month in the past four, slipping by 0.2 point in September to 64.9%. Participation has been sliding since early last year, though in September it was steady for people age 25 to 54.

The Bank of Canada in June became the first Group of Seven central bank to lower its policy rate, and has followed with two further quarter-percentage-point cuts since. Gov. Tiff Macklem has said it is reasonable to assume further interest-rate cuts, though the timing and pace will be determined by incoming data and what that means for future inflation.

Wage growth continues to outpace inflation but has slowed, adding to signs inflationary pressures continue to ease. Average hourly wages for permanent employees rose 4.5% in September from a year earlier, softer than the 4.7% advance economists anticipated and down from a 4.9% rise the month before.

Total hours worked fell 0.4% on-month, but were up 1.2% compared with a year earlier.

Write to Robb M. Stewart robb.stewart@wsj.com

(END) Dow Jones Newswires

10-11-24 0924ET