Employment was up by 12.1K net positions in September, following gains of 12K in August. The unemployment rate rose to 7.1% (from 7.0%) as additional Canadians joined the labour market.
Despite the similar headline number, September was in some sense the converse of August, as employment gains were led by part-time employment (+74K), while full-time employment more than reversed last month's gains, declining by 62K positions.
Reversing recent patterns, public sector employment was down on the month, falling by 28.8K positions. At the same time, private sector employment rose by 10.1K positions. Self-employment rose sharply (+30.8K), offsetting declines in firm employment (-18.6K)
Employment rose for both the goods-producing sector (+3.4K) and the services-producing sector (+8.7K). Within the goods-producing sectors, employment rose in construction (+6.8K) and agriculture (+3.0K), offsetting losses in the resource and utilities industries. Looking at the service industries, a significant drop in educational services employment (-51.3K) more than offset the year-to-date gains in that sector. In contrast, information, culture and recreation saw employment rise 32.5K, and strong gains were also seen in "other services", which includes repair and maintenance and other assorted services, up 21.6K net positions in September.
Looking across the provinces, employment gains were recorded in all provinces with the exception of Ontario (-33.8K) and Newfoundland and Labrador (-3.7K). Across the provinces, more individuals were generally in the labour force, resulting in increased unemployment rates in most provinces, despite employment gains.
Wage growth (for permanent workers) decelerated slightly in September, to 2.8% year-on-year, likely reflecting the full-time/part-time changes on the month. Regardless, wage growth outpaced inflation for the fifth consecutive month. The employment mix also resulted in a drop in the hours worked (-0.8%). For the quarter as a whole, hours worked were up by about 1.5% at annual rates, supportive of growth.
"Today's employment numbers add more paint to the generally positive picture of the Canadian economy in the third quarter. The quarterly gains in hours worked are supportive of growth, which is currently tracking at about 2.5% annualized for Q3",says TD Economics.
The drivers of to-date employment growth in Canada are mixed. Goods-producing sectors have seen net job losses, offset by gains in services, particularly health care and professional services. These increases cannot be sustained forever, and while we expect a recovery in hiring in the goods sectors, it is likely to be modest. As a result, employment growth the remainder of the year is expected to be modest (about 5K to 15K per month overall). Slow gains in employment will translate to a slow decline in the unemployment rate, and a deceleration of wage growth, which has been unusually strong recently when compared with the hiring numbers.
From the Bank of Canada's perspective, there was little in today's report that is likely to change their thinking. The Bank of Canada is expected to revise its forecast for third quarter upwards (currently 1.5% annualized, versus a consensus view of 2.2%), to reflect the improved near-term outlook for growth. Even with a better near-term growth outlook however, the Bank is unlikely to move interest rates any time soon.
"The Canadian economy continues to recovery neatly, but a significant output gap remains, and growth is expected to moderate to about 2% annualized over the medium term, closing the output gap quite slowly. With the Federal Reserve expected to begin raising its policy interest rate early next year, financial conditions in Canada will tighten, further reducing any impetus for a rate increase. All of these factors suggest that the Bank of Canada will sit on the sideline for quite some time", added TD Economics.
