EconoFACTS

May 05, 2023 | 09:13

Canadian Jobs/Population Boom

Economist

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter has over 30 years of experience ana... (Read more)

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter has over 30 years of experience ana... (Read more)

Canadian employment rose by a robust 41,400 in April, extending the string of robust job gains since last Fall, and yet again above expectations. While the details of the release were not as strong as the headline, the main point is that the labour market is simply not showing any signs of strain whatsoever. To wit, the unemployment rate held fast at a low 5.0% for the fifth consecutive month, and has barely budged over the past year. True, part-time jobs accounted for all of the monthly gains, as full-time employment fell for the first time in eight months (-6.2k). Even so, total hours worked still managed to rise 0.2% m/m, and are on course for a solid gain for Q2. Average hourly wages stepped back slightly, but at 5.2% y/y they are still too hot for the BoC's comfort.

Notably, even with yet another powerful rise in overall employment, the employment-to-population rate was flat at 62.4%. While that is close to recent highs, it's certainly not sprinting higher as the denominator is also rising very rapidly. StatCan estimates that the 15+ population is growing almost 70k per month so far in 2023, far above last year's average rise of just over 40k per month (which was close to pre-pandemic trends). A rapidly growing population, in turn, is pushing up the reported monthly job tallies, and this trend may well extend for quite some time yet. The point is that perhaps, against that backdrop, the more important gauges than headline jobs to follow are the unemployment rate and wages—although both of those metrics are also suggesting ongoing tightness.

The latest job growth was led by services, although both construction and manufacturing chipped in with small gains. Retail & wholesale trade rose 24k, followed by transportation & warehousing at +17k, and arts & recreation at +17k, and education with +15k. There was some softness in building services (-14k), finance (-9k), and, surprisingly, restaurants & hotels (-5k). Ontario (+33k) and Quebec (+11k) accounted for all of the job growth in the month, with the latter boasting the tightest unemployment rate in the country at just 4.1%.

Bottom Line: The robust headline job gains are no doubt being flattered by strong underlying population growth, and all of last month's rise was of the part-time variety. Nevertheless, the key point is that there is no evidence that the labour market is softening at all, lending important support for the broader economy. If this persists through the spring, the Bank of Canada may yet be forced to rethink its rate pause, especially with the housing market showing signs of reviving. All eyes will now turn to the next inflation report (CPI, May 16), which needs to continue slowing to keep the Bank on the sidelines.

Table 1 - Canada — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics