Canada's job gains came in hotter than expected as wage growth spiked
REAL ECONOMY BLOG | March 10, 2023
Authored by RSM Canada
February’s jobs data in Canada showed a still-strong labor market that did not offer any relief in terms of keeping inflation under control.
The net change in total employment dropped to 21,800 from a whopping 150,000 increase in January yet remained above the expectations of only 10,000.
At the same time, the unemployment rate and labor force participation rate stayed unchanged at 5.0% and 65.7%, respectively, according to data released Friday by Statistics Canada.
The more concerning data point was wage growth for permanent employees, which surged to 5.4% from 4.5% previously.
Hourly wage growth, though, is always subject to compositional effect, and this case was not an exception.
Job gains were driven mostly by the goods sector, which has higher average wages and posted a net gain of 17,500 jobs in February compared with an increase of 25,400 in January.
At the same time, the services sector, which includes lower-wage industries like leisure and hospitality, recorded a sharp drop in net gains, posting only a net increase of 4,200 jobs versus 124,700 in January.
The data came out amid a recent pause in rate hikes by the Bank of Canada. That pause will be put to a test, especially with inflation hard to predict.
We do not expect the Bank of Canada to surprise the market anytime soon, yet there are always risks that another strong Consumer Price Index report, which comes out next week, might prompt the central bank to do more.
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This article was written by Tuan Nguyen and originally appeared on 2023-03-10 RSM Canada, and is available online at https://realeconomy.rsmus.com/canadas-job-gains-came-in-hotter-than-expected-as-wage-growth-spiked/.
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