Wednesday, May 29, 2024

Economy adds 41,000 jobs in February, but employment gains lag population growth

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OTTAWA — Canada’s labour market is getting a helping hand from population growth as the economy added 41,000 jobs in February. 

Statistics Canada also reported on Friday that the unemployment rate ticked up to 5.8 per cent.

Job gains, which were driven by full-time employment, were spread across several industries in the services-producing sector, with the strongest growth in accommodation and food services.

The February increase comes after similar stronger-than-expected job gains in January.

The Bank of Canada’s steep interest rate hikes have helped cool the labour market over the last year by causing a pullback in spending. However, strong population growth appears to be offsetting some of those effects, including in the labour market.

“Certainly, that overwhelmingly large rise in full-time jobs is quite impressive,” said BMO chief economist Douglas Porter in an interview. 

“(But) it’s quite clear also that the numbers are being heavily influenced by the incredibly rapid population growth we’re seeing.” 

Over the last year, Canada’s population grew by 1,031,200 people while employment rose by 368,000 jobs. 

With more people searching for work at a time when the economy is slowing, Porter says job seekers may be more willing to take on less-than-ideal work. 

“As you add people to the labour force, and it gets tougher and tougher to find the kind of job you want, you might be more willing to take a job that’s available,” he said. “So we do get employment gains, it’s just there simply aren’t as many new jobs as there are new people.”

Andrew Grantham, CIBC’s executive director of economics, says population growth “continues to flatter the Canadian jobs figures,” though other measures of the labour market suggest weaker conditions. 

“There is evidence from a further decline in the employment ratio and increase in long-term unemployment that labour market conditions are continuing to weaken,” wrote Grantham.

“However, this is happening only gradually and not in a way that demands an imminent reduction in interest rates.”

Statistics Canada has been putting more emphasis on the employment rate in its reports recently to capture whether job gains are keeping up with the country’s ballooning population.

The federal agency noted Friday that the employment rate – which represents the proportion of Canadians aged 15 years and older who are employed – fell for a fifth consecutive month in February.

That’s the longest period of consecutive decreases since the six-month period ending in April 2009.

Porter says the decline in the employment rate is also being influenced by the greying population. 

“At the same time as we have this very rapid population growth and immigration growth, we’ve also got, of course, a lot of people who are hitting the age 65 every single month,” he said.

Meanwhile, wages continue to grow rapidly in Canada. Average hourly wages were up five per cent from a year ago, down from a rate of 5.3 per cent in January.

Economists reacting to Friday’s jobs report say it shouldn’t move the needle for the Bank of Canada.

The central bank, which is holding its key interest rate at five per cent, is widely expected to begin lowering its benchmark rate in June. 

On Wednesday, governor Tiff Macklem was tight-lipped about the future path of interest rates.

“With inflation still close to three per cent and underlying inflationary pressures persisting, the assessment of governing council is that we need to give higher rates more time to do their work,” said Macklem in a news conference.

“We’ve come a long way in our fight against high inflation. But it’s still too early to loosen the restrictive policy that has gotten us this far.”

This report by The Canadian Press was first published March 8, 2024.

Nojoud Al Mallees, The Canadian Press

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Statistics Canada is set to release its latest reading on the jobs market for the month of February today. A cyclist moves past a jobs advertisement sign in Toronto on Wednesday, April 29, 2020. THE CANADIAN PRESS/Nathan Denette

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