MNI: Canada Jobless Rate Jumps To 5.4% On Education Workers

Canada's jobless rate rose far more than economists predicted in August, to 5.4% from a record low 4.9%, as more people entered the labor force and there was a sharp decline in hard-to-measure contract education workers as the fall school season began. 

Employment fell by 39,700 as gains in scientific and technical services were overwhelmed by a 49,500 drop in education. Statistics Canada said calculating education employment "can be partially affected by slight variations in the timing of when school-year based contracts for temporary employees end and begin." Past job reports around back-to-school have also been affected by big swings in education.

Employment excluding education gained on the month and is much closer to the 15,000 job gain that economists anticipated. Growth of the labor force of 66,200 means a bigger divergence between the August unemployment rate and forecasts it would climb just a notch to 5%. 

The report showed other signs of underlying strength closer to the central bank's view of a tight economy that needs higher interest rates. Annual wage growth quickened to 5.4% in August from 5.2% in June and July and total hours worked climbed 3.7% from a year ago. The BOC hiked its key rate 75bps to 3.25% on Wednesday and said that while officials will start debating how much further to hike, they are worried about the risk of inflation becoming entrenched. 

Another sign of a strong job market is Statistics Canada's finding that about one in every 10 permanent workers plans to quit their job in the next year, double the proportion recorded in January, with the most common reason being a search for higher wages.

The Bank of Canada's July economic forecast laid out a scenario with a wage-price spiral showing increased risk of recession, laying out a potential contraction over four quarters with a peak quarterly decline of 2.5% at annual rates.

Even with employment falling for the last three months for a cumulative loss of 113,500, that still is just a fraction of the million jobs added over the previous year. Still, the jobs decline does line up with other recent reports suggesting inflation may have peaked and GDP growth will fade in the second half of this year.