MNI: Canada Job Gains Keep U-Rate Near Record Low, Wages Hot

Canada kept adding more jobs than economists predicted in March, keeping unemployment near a record low and wage gains running above the 5% pace the central bank says will frustrate its efforts to bring inflation back to target.

Employment rose by 34,700 in March to beat the consensus for a 7,500 gain. Statistics Canada also reported Friday the jobless rate held at 5%, close to last year's record low 4.9% in a month where economists predicted an increase to 5.1%. 

Wages climbed 5.3% from a year ago and hours worked by 1.6%, at a time when many economists and the Bank of Canada say the economy is stalling out or tipping into a mild recession. The composition of job gains was also favorable as private-sector hiring took over from recent gains led by governments, and there were slightly more new full-time positions than lower-paid part-time ones. 

Today’s report is the last major one before an April 12 interest-rate decision where the Bank of Canada is seen holding borrowing costs at 4.5%, the highest since 2007. Officials have signaled they are likely finished hiking if consumer prices keep slowing as expected.

Employment has climbed for seven straight months even with GDP stalling in the fourth quarter as firms drew down their inventories, high interest rates continue to slam the housing market and consumer finances are pinched by inflation and higher interest rates. Since then, StatsCan has reported more surprising economic growth through January at 0.5% and its flash estimate for February at 0.3%.

While wage gains have accelerated they are only now catching up to consumer price inflation that surged to 8.1% in June amid the Covid rebound and the Ukraine war. Bank of Canada officials have said wage gains of around 5% or a little less aren't consistent with restoring its 2% inflation goal, though their baseline forecast is for CPI to slow to 3% by midyear. 

Another optimistic sign in the Labour Force Survey was the share of people unemployed for 27 weeks or more fell to 16% from 20% a year earlier.