More jobs created in Canada in January as unemployment rate dips: Statistics Canada

Employment increased by 37,000 in January, following three months of little change. The employment rate fell 0.1 percentage points to 61.6%, as population growth (+0.4%) outpaced employment growth (+0.2%), reported Statistics Canada on Friday.

The federal agency said the unemployment rate fell 0.1 percentage points to 5.7%, the first decline since December 2022.

“The participation rate fell 0.2 percentage points to 65.3% in January 2024, as the number of people in the labour force held steady and the population aged 15 and older rose,” it said.

“There were employment gains spread across several industries in the services-producing sector, led by wholesale and retail trade (+31,000; +1.1%) as well as finance, insurance, real estate, rental and leasing (+28,000; +2.1%). There were declines in other industries, led by accommodation and food services (-30,000; -2.7%).

“Total hours worked in January rose 1.1% from one year earlier and were up 0.6% in the month. Average hourly wages among employees rose 5.3% on a year-over-year basis in January (+$1.74 to $34.75), following an increase of 5.4% in December 2023.”

Following three months of little change, employment rose by 37,000 (+0.2%) in January 2024, driven by an increase in part-time work (+49,000; +1.3%), explained StatsCan.

“The employment rate—the proportion of the working-age population that is employed—fell to 61.6% (-0.1 percentage points) in January, the fourth consecutive monthly decline, as the population aged 15 and older in the Labour Force Survey (LFS) grew by 126,000 (+0.4%) in the month. On a year-over-year basis, employment rose by 345,000 (+1.7%), while the working-age population, driven by permanent and temporary immigration, rose by 1.0 million (+3.1%), pushing the employment rate down 0.8 percentage points,” it said.

“Following two months of little change, employment rose by 48,000 (+1.1%) among public sector employees in January. It was little changed in the month for private sector employees and self-employed workers. On a year-over-year basis, employment was up 4.1% for public sector employees (+174,000), up 1.6% for private sector employees (+210,000) and little changed for self-employed workers.”

The unemployment rate fell 0.1 percentage points to 5.7% in January 2024. This was the first decline in the unemployment rate since December 2022. The unemployment rate had been on an upward trend through most of 2023, rising from 5.1% in April to 5.8% in December, added the report.

Andrew Grantham, Senior Economist with CIBC Capital Markets, said the latest data suggested that Canadian labour market conditions tightened slightly in January, but remain looser than they were a year ago.

“The 37K increase in employment was better than the 15K expected by the consensus, although job gains were generally tilted towards part time (+49K) rather than full time positions (-12K). By sector, job gains were led by retail and finance, with those partly offset by a further decline in accommodation & food services. While population growth remained brisk, a decline in the participation rate meant that the gain in employment was enough to take the unemployment rate down one tick to 5.7%, in contrast to consensus expectations for an increase to 5.9%. Wage growth for permanent employees slowed to 5.3%, from 5.7%, which was in line with expectations but still above levels that policymakers will be comfortable with, while hours worked increased by a robust 0.6% on the month. Today’s data suggest that the Bank won’t be in a rush to cut interest rates, and we maintain our expectation for a first move in June. Given indications from today’s data and previously released GDP figures that the Canadian economy is in somewhat better shape than previously expected, we now forecast 25bp fewer cuts by the end of the year (finishing at 3.75% rather than 3.50%),” he said.

Perhaps the key takeaway from this mixed report is that there are no obvious signs of stress for the economy, at least in these results, said Doug Porter, Chief Economist with BMO Economics.

“A decent job gain, a slide in the jobless rate, and persistent 5% wage growth are hardly the stuff of an urgent call for rate cuts. The Bank of Canada is likely to view this report as further reason for a patient policy stance,” he said.

The headlines for today’s job report suggested surprising strength from the Canadian labour market, said James Orlando, Director of Economics at TD Bank.

“However, while falling unemployment is a good sign for the strength of the job market, the underlying details were weak. All the job gains were part-time, with the vast majority coming from cyclically insensitive public sector hiring. This along with the regular seasonality issue with January job reports (remember the head fake we got last January?), we’d argue that it is not the type of report the makes us think the Canadian labour market is in for a renewed upturn. Case in point, the lower unemployment rate was helped by weaker participation – not a typical sign of a strong labour market,” he said.

“The Bank of Canada won’t change course after today’s report. The data are simply too volatile and don’t paint a clear picture of the state of the Canadian economy. This leaves the BoC to continue fixating on the state of inflation. With headline and core inflation rates stuck around the mid-3% level, the Bank needs to see improvement before it can be convinced that it will reach its goal of price stability. This has markets pushing back on the timing of rate cuts, with June or July as the most likely start date.”

Mario Toneguzzi