MNI: Canada Unemployment Up As Jobs Lag Population; Wages Hot

Canada's unemployment rate continued drifting up in November as job creation lagged population gains fueled by record immigration, though wages are still running hotter than the central bank says is consistent with stabilizing prices.

Employment grew by 24,900 to beat the economist consensus for a 13,500 gain, but still short of the 36,000 increase in the labor force. That gap moved up the jobless rate a notch to 5.8% in November, matching expectations, and taking it to a fresh high against the rate of 6.5% recorded in January 2022. Unemployment has climbed from a low of 5.0% in April. 

There was some underlying strength in the report with higher-paying full-time jobs growing by 59,600 and part-time declining by 34,700. Pockets of labor shortages persist with unemployment at an almost unheard 2.7% in Quebec City. Average hourly wages climbed 4.8% in November from a year ago, well ahead of the Bank of Canada's 2% inflation target, and officials have said such gains are out of whack with labor productivity falling for more than a year now.

Companies may be responding to GDP that's stalled out in the second and third quarters, cutting hours by 0.7% in November, the most since April 2022, though they remain up 1.3% from a year ago. 

The report mirrors Governor Tiff Macklem's view the economy is moving from overheated demand to some signs of slack he says is needed to pull inflation back to target. He expects returning to 2% CPI will take until perhaps the middle of 2025. Economists universally predict the Bank will keep the policy interest rate at 5% for a third straight meeting on Wednesday and this job report is the last major piece of data due before then. Macklem has hiked 10 times from near-zero borrowing costs.

Employment increased in manufacturing and construction while there were declines in wholesale and retail trade. One notable decline comes from finance, insurance, real estate, rental and leasing, with a loss since July of about 63,000 positions or -4.4%, the steepest decrease of any industry.

The margin of error in Statistics Canada’s survey around employment is 30,700, meaning the specific job shift reported today isn’t significantly different from zero.

Judging the economy's tightness is complicated with the biggest influx of immigrants in decades boosting labor supply and creating more demand, especially in a stretched housing market. StatsCan has said population growth in recent months means job gains around 50,000 per month are needed for the employment rate to remain constant.

One wider risk is if unemployment lurches upwards amid a fragile economy because Canadians have racked up debts worth more than the nation's GDP, and officials themselves say it's unclear how much drag is still coming from past monetary tightening.