Unemployment rate down to 40-year low
Improvements hide key piece of data: weakening wage growth
OTTAWA— A blast of new jobs last month knocked the country’s unemployment rate down to its lowest level since Statistics Canada started measuring comparable data more than 40 years ago — but despite eye-catching progress, Friday’s numbers also delivered disappointment.
Canada added 94,100 net jobs for its largest monthly increase since March 2012 when there was a gain of 94,000 jobs, Statistics Canada said in its labour force survey. The November surge was fuelled by other positives: 89,900 new full-time positions and 78,600 employee jobs in the private sector.
The jobless rate fell to 5.6 per cent last month from October’s reading of 5.8 per cent, which had been the previous low mark since comparable data first became available in1976. The old statistical approach — prior to1976 — registered an unemployment rate reading of 5.4 per cent in 1974. The improvements, however, obscured a key piece of data: weakening wage growth.
Year-over-year average hourly wage growth for permanent employees continued its decline in November to 1.46 per cent — its lowest reading since July 2017. “There’s no question that the headline job growth is gangbusters strong,” said Frances Donald, head of macroeconomic strategy at Manulife Asset
Management. “I would caution us against celebrating too quickly, however, because wage growth is decelerating sharply,” Donald said.
Experts have been expecting wage growth to pick up its pace, thanks to the tightened labour market. But the opposite has been happening — wage growth has dropped every month since its May peak of 3.9 per cent and now sits well below inflation.
The Bank of Canada keeps a close watch on wages ahead of its interest-rate decisions.
The central bank has raised the rate five times since the summer of 2017 in response to Canada’s strong economic performance. Governor Stephen Poloz has signalled that more increases will be needed to keep inflation from rising too high.
On Wednesday, however, Po- loz held the benchmark rate at 1.75 per cent. In explaining the decision, he highlighted other economic negatives such as weaker-than-expected busi- ness investment and the steep slide in oil prices. The bank’s next rate announcement will be Jan. 9. Donald expects the bank to remain focused on oil prices, the capacity of the energy sector to engage in business investment and the ability of Canadians — many of whom are carrying very high debt loads — to manage higher interest rates.
“Canadians need more wage growth to offset higher interest rates,” she said.
“If we’re seeing wage growth that can’t even keep up with the pace of inflation, it makes it much more difficult for households to absorb the Bank of Canada’s desire to lift rates higher from this point forward.”
Poloz, she added, will be more concerned about the slowdown in wages rather than optimistic about the overall job gain, particularly since it could affect the pace at which he will lift rates. Royce Mendes of CIBC Economics said the Bank of Canada will take notice of the “massive reading” in the November jobs report as it mulls next month’s rate decision.
By region, employment rose in six provinces and was led by gains in Quebec and Alberta.