Canada’s unemployment rate fell to 6.5% in November, the lowest in 16 months, due to a significant cool-down in population growth and the labor force. The economy added an unexpected 54,000 jobs, primarily in the private sector and among young people, though most of these gains were part-time. Alberta saw the largest employment gains, with several other provinces also contributing. Strong job growth coupled with increasing average hourly wages and recent economic data suggest the Bank of Canada is unlikely to cut interest rates anytime soon.
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In October, the Canadian economy added a surprising 67,000 jobs, causing the unemployment rate to fall to 6.9%. While much of the job growth was in part-time positions, there were notable gains in wholesale and retail trade. Though the jobless rate decreased, it remained elevated and concentrated in specific sectors, signaling a labor market still recovering. Economists predict that the Bank of Canada will likely pause on rate cuts in December due to this data, and continued slow growth in employment overall.
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Canada’s inflation rate rose to 2.4% in September, exceeding expectations, primarily due to climbing grocery prices and slower declines in gas and travel tour costs. Grocery prices increased by 4% year-over-year, influenced by pricier fresh produce and sugary items, while rental prices also contributed to inflationary pressures. Despite the overall increase, gas and travel tour prices fell at a slower pace compared to the previous year. Economists suggest the Bank of Canada’s upcoming interest rate decision will be more complex than anticipated, with potential for further rate cuts amidst conflicting economic indicators.
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On Wednesday, the Bank of Canada reduced its key interest rate by 25 basis points to 2.5 per cent, marking its first cut since March. This decision was made due to a weakening economy, softening job market, and reduced inflation risks, which the central bank believes are now more “contained”. The U.S. trade war continues to impact the Canadian economy, specifically in tariff-exposed industries. Despite a stronger-than-expected consumer spending in the second quarter, the central bank decided that a rate cut was still appropriate to better balance the risks going forward.
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John Q. Hosedrinker