MNI: Canada Wages Running Hot Even With Unemployment Rising

Canada's unemployment rate increased for the fourth time in six months in October as job gains lagged population growth fueled by record immigration while wages continued to grow at a about 5% clip the central bank says is at odds with restoring price stability.

Payrolls increased by 17,500 according to Statistics Canada's report Friday from Ottawa, in line with an economist consensus for 15,000 positions. The gain lagged a 57,800 rise in the labor force, so the unemployment rate climbed to 5.7% from 5.5% that's higher than the expected 5.6% rate. The jobless rate last year touched generational lows of 4.9%. 

The Bank of Canada is holding its key lending rate at 5% or the highest since 2001 saying there's more evidence its 10 increases are creating a needed spell of below-potential growth that will bring inflation back to target in 2025. Officials have also said inflation risks have increased in recent months and they are prepared to hike again, in part because rapid wage growth is troubling at a time when worker productivity is declining.

On the wage front the job market continues to point to sticky inflation, with average wages up 4.8% from a year ago following the prior month's 5% gain. 

Other details of the report suggest loosening in the job market, with StatsCan pointing to a 16% rise in the number of unemployed people since April. Full-time hiring that's dominated job gains over the last year also took a step back in October with a decline of 3,300 versus a 20,800 rise in part-time work. Still, over the past year about 450,000 of the 500,000 jobs added have been in higher-paying full-time roles.

Record immigration is also having an influence on the job market, with StatsCan recently noting 50,000 jobs are now needed each month to hold the rate of employment steady, double the requirement in the years before the pandemic. Job growth has averaged 28,000 per month since January. The government this week said it will keep increasing immigration to 500,000 a year. 

Total hours worked, which many economists see as a proxy for GDP, were "virtually unchanged" in October, StatsCan said. While they are up 2.1% on a year-over-year basis, that October stall is more consistent with the agency's flash estimate that GDP shrank a bit again in the third quarter. 

With output stalling the job figures take on increased importance in figuring out if the economy is moving into a recession. Bank of Canada Governor Tiff Macklem has said even a few quarters of slightly negative GDP growth aren’t a true recession and inflation pressures have increased due to factors including wage gains running well ahead of productivity. Demands for big pay hikes were underlined by a recent offer to Ford's autoworkers for a 15% raise over three years and revived talk of a contract with 1970s-style cost of living allowances, and a recent strike by dockworkers along the St. Lawrence Seaway. The Bank unlike the Fed has no mandate for full employment, rather a single 2% inflation t