The Canadian labour market exceeded many economists’ expectations in September, adding more than twice as many jobs as the previous month while unemployment ticked lower — but digging deeper into the numbers shows employment remains a concern, analysts say.
Statistics Canada reported on Friday that the economy added 47,000 jobs in September, while the unemployment rate declined for the first time since January to 6.5 per cent.
Full-time employment also saw its largest gain since May 2022. The overall job gains followed four consecutive months of little change, the agency said.
Job market numbers can be volatile month to month and don’t provide a full picture of the economy, but it’s still positive to see the unemployment rate tick down, BMO chief economist Doug Porter told CBC News.
“The unemployment rate in the past year or so has been on a one-way street higher,” Porter said. “The fact that the unemployment rate is down a bit is encouraging.”
The jobs increase suggests the economy might be picking up a little after a “pretty tough summer,” he said, with full-time employment soaring.
But many analysts pointed out that the overall market news was “mixed,” with Katherine Judge, an economist at CIBC, stating in a note that “the headline masked some weaker details.”
“Total hours worked decreased by 0.4 [per cent], while the employment rate fell by a tick.”
Looking at the broader trend, the unemployment rate has been steadily climbing over the past year and a half, hitting 6.6 per cent in August.
Inflation that month was two per cent, the lowest level in more than three years, as lower gas prices helped it hit the Bank of Canada’s inflation target.
The central bank has cut its key interest rate three times this year and is widely expected to keep cutting, as inflation has subsided and the broader trend points to a weakening in the labour market.
Participation in job market down
Despite the job gains in September, which were driven by youth and women aged 25 to 54, the employment rate was lower in the month, reflecting continued growth in Canada’s population.
Statistics Canada said since the employment rate saw its most recent peak at 62.4 per cent in January and February 2023, it’s been following a downward trend, as population growth has outpaced employment growth. On a year-over-year basis, employment was up by 1.5 per cent in September, while the population aged 15 and older in the Labour Force Survey grew 3.6 per cent.
But the participation rate — which is the percentage of the working-age population that either has a job or is looking for one — dropped in September, the third decline in four months and a continuation of a downward trend seen since late 2023.
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“This trims some of the potential enthusiasm from today’s jobs data,” Geoff Phipps, trading strategist at Picton Mahoney Asset Management, said in a note.
The downtick in the unemployment rate came from that slightly lower labour force participation, according to Brendon Bernard, an economist at Indeed Canada.
“Ultimately, the employment rate is probably the best barometer of the job market’s health, and over the past year, it’s declined in all but one month,” he said in a note.
BMO’s Porter noted that September can be a tricky month for jobs market numbers because it’s the start of the school year, which may have “helped nudge the jobless rate a bit lower” as students leave the workforce.
The information, culture and recreation industry saw employment rise 2.6 per cent between August and September, after seven months of little change, StatsCan said, with the increase concentrated in Quebec.
The wholesale and retail trade industry saw its first increase since January at 0.8 per cent, while employment in professional, scientific and technical services was up 1.1 per cent.
Average hourly wages among employees are also growing at a slower rate. Wages rose 4.6 per cent year-over-year to $35.59, a slowdown from the five per cent increase in August.
The unemployment rate among Black and South Asian Canadians between 25 and 54 rose year-over-year in September and was significantly higher than the unemployment rate for people who were not racialized and not Indigenous.
Black Canadians in that age group saw their unemployment rate rise to 11 per cent last month, while for South Asian Canadians it was 7.3 per cent. For non-racialized, non-Indigenous people, it rose to 4.4 per cent.
Continued interest rate cuts expected
Friday’s numbers mark the final data release on the state of the labour market before the Bank of Canada’s next interest rate decision on Oct. 23, but nothing in this report has swayed predictions of further cuts, experts say.
“The debate in the market is whether the bank in fact should cut by half a point later this month or a quarter point,” Porter said.
Leslie Preston, managing director and senior economist at TD, said its forecast is unchanged at a quarter of a point.
“I think the Bank of Canada would need to see a more rapid worsening in Canada’s economic outlook to move to a [50-basis-point cut],” Preston said.
Not everyone agrees. RBC assistant chief economist Nathan Janzen wrote in a note on Friday that the bank’s forecast is for a half-percentage-point cut in October and another in December.
“Details behind the September job numbers were far more mixed than the headline employment and unemployment rate readings alone would imply,” he wrote.
