Canada’s unemployment rate holds steady at 6.5% as jobs report misses expectations

Canada’s labour market added a net 14,500 jobs in October, falling short of economist expectations, while the unemployment rate held steady at 6.5 per cent, according to Statistics Canada data released on Friday. Analysts polled by Reuters had expected a net addition of 25,000 jobs, and the unemployment rate to tick up to 6.6 per cent.

The growth was driven by a rise in full-time employment, with a net increase of 25,600 in October, while part-time employment fell 11,200.

“Canadian employment growth was lackluster in October, with the unemployment rate only holding steady because of a further decline in labour market participation,” CIBC economist Andrew Grantham wrote in a note on Friday, adding that some of details of the report, such as the rise in full-time work, were better than the headline miss.

“With one more employment report before the [Bank of Canada’s] next interest rate decision, today’s release was never going to close the book on the 25 vs. 50 basis point cut debate. The mixed nature of today’s data didn’t help, but we continue to lean towards another 50 basis point move.”

Last month, the Bank of Canada cut its benchmark interest rate by 50 basis points to 3.75 per cent, the fourth consecutive rate cut since June. Even as the central bank cuts rates, it noted last month that while job layoffs have remained modest, business hiring has been weak. That has affected newcomers and young people in particular, the Bank said.

But it appears that youth employment may have started to recover. Employment for youth between the ages of 15 and 25 increased by 33,000 in October, driven by gains among young men (+25,000.) The youth employment rate increased 0.4 percentage points, the first increase since April.

Average hourly wages increased 4.9 per cent year-over-year, following an annual increase of 4.6 per cent in September.

BMO Capital Markets chief economist Douglas Porter wrote in a research note that the October report is “very much consistent with an economy that is still grinding out modest growth, and wage gains that are slightly hot for comfort.” Still, he doesn’t expect it will sway the Bank in terms of a decision on a 25 or 50 basis point cut.

“This so-so result doesn’t really turn the dial on the Bank of Canada’s cut-o-meter, with the market still leaning slightly to a follow-up 50 basis point reduction in December,” Porter wrote.

“We would suggest that with the Canadian dollar on its heels, signs that the Canadian housing market is stirring again, and the U.S. economy still chugging along, the Bank may well turn a bit more cautious on the rate-cut front.”

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