The Canadian economy added a net 46,700 jobs in September, more than expected, while the unemployment rate fell for the first time in 8 months to 6.5%, based on data on Friday.
Analysts polled by Reuters had expected a net increase of 27,000 jobs and that the unemployment rate would rise to 6.7% from 6.6% in August. The job gains were in full-time work, which posted the largest increase since May 2022 and more than offset the decline in part-time employment, based on data from Statistics Canada.
The strong jobs data may ease some concerns about a Canadian labor market slowdown and may weaken the case for a larger-than-usual rate cut by the central bank.
The central bank has cut the policy rate by 25 basis points at each of its last three meetings, and is expected to cut rates again at its next announcement on October 23. Financial markets fully expect a rate cut of 25 basis points next week, and the chance of a large-scale rate cut of 50 basis points fell to 36% from 53% previously after the jobs data was released.
The Canadian dollar recovered early morning losses after the release of jobs data and traded 0.01% stronger to 1.3738 against the US dollar, or 72.79 US cents. Two-year government bond yields increased by 5.4 basis points to 3.316%.
The wholesale and retail trade, information, culture and recreation and professional, scientific and technical services sectors accounted for most of the increase.
The drop in the unemployment rate in September was driven by youth, with the unemployment rate falling by 1 percentage point to 13.5%, according to Statscan.
Average hourly wage growth for permanent workers slowed to an annual rate of 4.5% from 4.9% in August. The wage growth rate in focus is the slowest since the 3.9% recorded in June 2023.
The Bank of Canada has identified weakness in the labor market as one of its main concerns in an effort to offset the effects of the opposing forces on inflation, the still high cost of housing and services as well as a weakening economy and rising unemployment.
In September, immigration-driven population growth continued to outpace employment growth, with the proportion of the working population falling 0.1 percentage points to 60.7%. The participation rate also fell to 64.9% from 65.1% in August, the third decline in four months. Employment in the goods sector decreased by 3,600 net jobs, while the services sector added 50,200 net jobs.
