MNI: Canada Wages Up 5% Even With Highest Jobless Rate In 2Yrs
Canada's jobless rate climbed to the highest in more than two years in March while wages continued gaining at a 5% pace, with the last major report before the central bank's rate decision Wednesday providing more of the mixed evidence making officials hesitant to embrace cutting borrowing costs.
Employment declined by 2,200 on the month and the labor force grew by 57,700, pushing up the jobless rate to 6.1% from 5.8%, Statistics Canada said Friday from Ottawa. Economists predicted a gain of 20,400 jobs and a 5.9% unemployment rate. While the jobless rate remained below peaks set during Covid lockdowns, excluding that period it's now the highest since November 2017.
The report adds to evidence the economy is opening up more slack while flashing warning signs about stubborn inflation, following stronger-than-expected GDP reports and core inflation sticking above 3% as headline prices move below that mark. Bank Governor Tiff Macklem has said he needs proof inflation is headed durably back to his 2% target and most economists see a rate cut in June.
Following monthly GDP reports suggesting the economy may have grown at a 2% annualized pace in the first quarter rather than the 0.5% pace the BOC estimates, the Labour Force Survey showed hours worked little changed in March but up 0.7% from a year earlier.
The March data showed a shift to some higher-paying jobs in fields such as healthcare and finance and declines in lower-paying sectors like hospitality and retailing. That could be a sign that not all the wage growth is coming from incumbent workers getting bigger raises. One weak spot in the data is that private-sector employment was little changed for a fourth consecutive month, and for eight of the last nine months.
While the jobless rate has climbed by a percentage point over the last year, it's still closer to historical lows of 4.9% than the kind of double-digit figures recorded during the pandemic. That's in line with the Bank's view that only modest economic slack has opened up after its 10 rate hikes to 5%, the highest since 2001. Another complication is the government's recent shift from backing record immigration to capping some new entrants, which makes it harder to estimate potential labor supply and inflationary pressures.