MNI: Canada Unemployment Posts First Fall In A Year, Wages Hot

Canada's unemployment rate fell for the first time in a year in January on faster-than-expected job creation while wage gains held above the 5% pace the central bank says is slowing the way back to price stability.

The jobless rate fell to 5.7% from 5.8% in Statistics Canada's report Friday from Ottawa while the economist consensus was for an increase. Employment growth also was much better than forecasts at 37,300 compared with the consensus for 10,000 net new positions.

With the Bank of Canada debating whether the economy has cooled enough to take a serious look at undoing some of its 10 rate hikes the Labour Force Survey showed wages gaining 5.3% from a year earlier, potentially even more inflationary with worker productivity in free-fall. Investors see the first interest-rate cut around the middle of this year, forecasts that have already been pushed back in recent weeks amid signs of economic strength in Canada and its biggest trading partner the U.S. 

Even the idea Canada's economy has stalled out was challenged with hours worked rising 0.6% on the month and 1.1% from a year earlier.

Sluggish growth and a population boom fueled by immigration is still widely expected to boost unemployment this year from the record lows seen during the pandemic rebound, though it’s unclear if that will bring down wages or consumer prices. Inflation has exceeded the Bank's 2% target for almost three years and it appears workers are demanding big pay raises to catch up. The Bank's own surveys show consumers and firms doubt CPI is returning to target anytime soon even with officials forecasting inflation back at 2% sometime next year. 

There were signs of a mixed or weaker job market in the January figures. Higher-paying full-time employment declined 11,600 while part-time work advanced 48,900, and the overall job gain still lagged the pace of about 50,000 StatsCan has said is needed to keep up with population growth. Canada's participation rate and employment rate both declined in January, suggesting slack is building up. 

Overall employment gains also masked a wide dispersion across industries. Wholesale and retail jobs rose about 31,000 and finance recouped some of its recent declines with an increase of 28,000, while hospitality fell 30,000.