For the first time in months, Canada’s unemployment rate has decreased, falling to 6.5% in September as the country added 47,000 new jobs. This marks a notable improvement in the job market, which had been stagnant since the beginning of the year. According to the government’s statistical agency, these gains were a positive surprise, exceeding analyst expectations.

Key Highlights:

• Job Growth: Canada added 47,000 full-time jobs, all in the private sector.
• Unemployment Rate: The unemployment rate dropped to 6.5%, its first decline of the year.

Despite this job creation, other indicators reveal that the overall labor market remains somewhat subdued.

Cooling Labor Market

While the increase in employment is encouraging, economists point out that the Canadian labor market is still showing signs of weakness:

• Hours Worked: Total hours worked across the country decreased by 0.4% in September.
• Wage Growth: Wage growth cooled, with average hourly wages rising by 4.6%, a slower pace compared to earlier in the year.

TD Bank senior economist Leslie Preston commented, “A move down in Canada’s unemployment rate is good news, but the September jobs report does not change the picture of a labor market that has cooled notably since the Bank of Canada started raising interest rates.”

Impact of Interest Rates on the Labor Market

The Bank of Canada had begun aggressively hiking interest rates in March 2022 to combat inflation. However, as inflation has slowed, the central bank has since adjusted its approach:

• Interest Rate Cuts: Following three rate cuts since June, the Bank of Canada’s key lending rate now stands at 4.25%.
• Future Predictions: Analysts expect another rate cut during the central bank’s next meeting on October 23, with predictions ranging from a 25 basis point cut to a more aggressive 50 basis point reduction.

Royce Mendes from Desjardins Group noted, “A healthy increase in jobs won’t change our call that central bankers will cut rates by 50 basis points later this month.”

Job Gains Across Multiple Sectors

According to Statistics Canada, job creation in September was spread across various sectors, including:

1. Information, Culture, and Recreation: Significant job growth.
2. Wholesale and Retail Trade: Continued strength in this sector.
3. Professional, Scientific, and Technical Services: A rise in employment.

Additionally:

• Private Sector: Employment in the private sector increased for the second consecutive month.
• Public Sector: Public sector employment, however, saw a decline.
• Full-Time Jobs: September also witnessed the largest gain in full-time employment since May 2022.
• Part-Time Jobs: These gains were somewhat offset by a decline in part-time work.

The drop in Canada’s unemployment rate and the addition of 47,000 jobs in September are promising signs for the country’s labor market. However, challenges remain, as the total hours worked fell and wage growth slowed, indicating a labor market that is still adjusting to the impact of rising interest rates. With the Bank of Canada’s next move anticipated later this month, the country’s economic landscape could see further shifts depending on future rate adjustments.