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Randall Bartlett
Senior Director of Canadian Economics
Economic News
Canada: October Jobs Data Suggest Population Gains May Be Slowing
November 8, 2024
Highlights
- Total Canadian employment rose by 15k jobs in October 2024, about half the pace expected by economic forecasters. The unemployment rate was unchanged at 6.5%. Total hours worked jumped 0.3% m/m and were up 1.6% y/y over the prior year, while average hourly wages accelerated to 4.9% y/y in the month after slowing in September. Table 1 summarizes key data points.
- Our Q4 2024 forecast for real Canadian GDP growth remained in the range of 2-2.5% annualized following the October employment data, broadly in line with the forecast in the Bank of Canada’s (BoC) most recent Monetary Policy Report. Third quarter tracking remained unchanged at around 1%, below the Bank’s most recent forecast of 1.5%.
Implications
Canada’s labour market posted job gains for the third consecutive month in October. Hiring was concentrated in business, building and other support services (29k) while finance, insurance, real estate, rental and leasing (-13k) and public administration (-9k) saw losses. All of the gains were in full-time employment (26k), with hiring of private employees (21k) making another notable advance in the month. By province, Alberta (13k) and British Columbia (8k) saw the largest gains while Ontario (-11k) shed the most jobs.
While October’s employment gain was welcome, it wasn’t nearly enough to keep up with population growth (graph 1), helping to push the employment rate lower for the sixth consecutive month (to 60.6%). But when combined with the participation rate falling one tick in the month to 64.8%, the unemployment rate held firm. The unemployment rate among younger workers (ages 15 to 24 years) fell again in October, down 0.7 percentage points to 12.8%, after dropping by a full percentage point in September. More worryingly, employment among prime-aged workers (those 25 to 54 years) fell by 11k in October—the first monthly decline since May and only the second setback this year—pushing the unemployment rate in this group to the highest level in over two years at 5.6%.
While still-strong skyrocketing population gains well outpaced labour demand again in October, month-over-month population growth was the slowest it’s been since December 2023. This could be the start of a deceleration in the advance in Canada’s population, as the federal government plans to reduce the number of both permanent External link. and non-permanent External link. residents admitted over the next few years. If it’s successful, that will weigh on headline real GDP growth nationally External link. and in all provinces External link., supporting ongoing rate cuts by the Bank of Canada. If the federal government’s plans are fully implemented, it also poses a meaningful downside risk to the central bank’s economic outlook, which is underpinned by sustained strong population growth (graph 2).
Despite the still-torrid pace of population gains, the wage growth of permanent employees remained well above the pace of inflation in October, reaccelerating to 4.9% y/y after posting the slowest growth in over a year in September (graph 3). While this would normally be more concerning for the Bank of Canada, the Bank also puts by far the least weight on the Labour Force Survey as a measure of wage growth. Regardless, all wage indicators show than Canadians are clawing back some of the real wages lost during the recent bout of high inflation. On a further positive note, wage gains were concentrated in the private sector in October, tentatively reversing the trend toward the high and rising public-sector compensation we’ve previously highlighted External link..
With inflation having fallen below the Bank of Canada’s 2% target in September, the labour market has taken on increased importance for monetary policy decision making. And while the October data indicates the labour market may not be ready to throw in the towel just yet, our tracking is for modestly weaker real GDP growth print in the second half of 2024 than the Bank of Canada’s October forecast. The Bank of Canada’s economic outlook for 2025 and 2026 is now also subject to further downside risk from slower population growth and the potential reescalation of trade protectionism following the US election External link.. As such, we remain of the view that the Bank will cut the policy rate by 25 basis points (bps) in December, and is likely to follow this with another five cuts of similar magnitude in 2025. But if the labour market and broader economy start exhibiting greater weakness going forward, the question will not be if the Bank continues to cut rates but if the pace of rate cuts will need to accelerate relative to our and market expectations.