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More of the Same: Job Growth Stalls in October

Canadian Economics

By: Liam Daly

  • In October, there was little employment change in Canada. Private sector employment stalled following gains in the previous two months. The unemployment remained fixed at 6.5 per cent.
  • Among the goods-producing sectors, there were modest gains in construction (+6,300) and manufacturing (+9,700), while employment in agriculture (–4,700) contracted. Meanwhile, in the service economy, more people were employed in business, building and other support services (+28,700), educational services (+11,600) and accommodation and food services (+12,200). However, these job gains were offset by lower employment in wholesale and retail trade (–8,000), transportation and warehousing (–9,300), finance, insurance, real estate, rental and leasing (–13,000), public administration (–8,700) and other services (–7,600).
  • Across Canada, employment rose in just two of the ten provinces. Employment increased in Alberta (+13,000; +0.5 per cent) and New Brunswick (+3,300; +0.8 per cent). The job count declined in Prince Edward Island (–1,100; –1.2 per cent). In the remaining provinces, employment was essentially unchanged.
  • The survey reports that in October, nearly 30 per cent of Canadians resided in a household that struggled to meet its financial needs a signal that despite lower inflation, elevated levels of financial stress continue to linger.

Key Insights

Inflationary pressures are largely under control and Canada’s economy is slowly shifting to a new phase of the business cycle. Our Index of Consumer Confidence and Index of Business Confidence remain depressed relative to historic averages, but both are showing early signs of improvement. Over the coming months, we expect this to trend to build as further rate cuts stimulate demand. This will eventually feed stronger labour demand, particularly across the private sector.

Slacker conditions in the labour market are giving way to slower wage growth. Wages take time to respond to changing balance of supply and demand in the labour market. In 2025, weaker wage growth will cut into to household income growth. Households choose whether to allocate income to savings or consumption. Interest rate cuts reduce debt costs as well as the return on savings. A combination of weaker income growth and lower interest rates will limit consumers capacity and appetite for saving, and net savings are expected to fall in 2025.

Canada’s population growth is expected to slow sharply over the coming quarters as the new immigration targets and measures to reduce the stock of temporary residents take effect. These policy measures will have important implications in the job market, which relies heavily on international migration as an engine of labour force growth. By constraining the labour pool, the unemployment rate is expected to reverse course, declining steadily over the next three years. The cuts would also reduce demand in the economy, weighing on employment growth, consumer spending and business investment. The government must seek the optimal balance of international migration to offset the supply-side pressures of an aging population while not overloading demand for public services and housing. If fully realized, the proposed measures would represent a drastic course change, and we would expect the labour market to tighten swiftly and hiring headaches in several sectors to intensify.

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