MNI: Canada Job Growth Beats Forecasts And Wage Gains Stay Hot

Canada's job growth kept beating economist forecasts and wages kept climbing at a 5% pace in February that the central bank has said is at odds with inflation coming smoothly back to target.

Employment rose by 40,700 according to Statistics Canada's report Friday, faster than the consensus forecast of 20,000 positions. The unemployment rate climbed a notch to 5.8% in line with forecasts as record immigration boosted the labour force by 76,400.

Wages rose 5.0% from a year ago compared with January's 5.3% pace but that's still far above the gains that were stuck close to the Bank of Canada's 2% inflation target before the pandemic. Governor Tiff Macklem held his key borrowing rate at the highest since 2001 on Wednesday saying it's too soon to consider a cut, and he told MNI there needs to be progress across a broad range of price indicators. The Bank also said there's some evidence that the wage gains are softening after a period of gains in the 4% to 5% range.

Even with some signs of slowdown wage growth is now also running far ahead of CPI inflation of 2.9%. Overall inflation has also been above target for three years now, and that combined with the wage pressures suggest more sticky second-round inflation effects have set in. 

The report underscores the mismatch between a rising unemployment rate that indicates more slack in the economy to pull down prices and workers still demanding bigger paydays. StatsCan also pointed to the longest slide in the percentage of working-age Canadians holding a job since 2009 during the depths of the global financial crisis, another reflection of the record influx of workers. 

While the job market has shown some signs of a slowdown following the Bank's 10 interest-rate increases there hasn't been the kind of hard landing many investors had predicted. February's job report showed hours worked, a proxy for GDP, climbed 1.3% from a year earlier. That adds to evidence GDP may have grown at a 1% annualized pace in the first quarter, faster than the Bank's estimate of 0.5% growth but still below the economy's potential. 

Full-time employment rose 70,600 on the month, the fastest since June and another sign of resilient demand, while lower-paying part-time work declined by 29,900.