OTTAWA--Canadian companies experienced stronger-than-anticipated hiring last month, leading to a decrease in the unemployment rate for the first time in over a year. However, job growth was still outpaced by the ongoing population boom.
According to Statistics Canada's report on Friday, the number of employed working-aged people in Canada increased by 37,300 in January compared to the previous month. This resulted in a 0.1 percentage point decrease in the unemployment rate, now at 5.7%. It marks the first decline in 13 months and exceeded economists' expectations, who predicted a jobless rate of 5.9%. The pace of hiring in January was the strongest since September, after three months of little change.
While these figures indicate continued resilience in Canada's labor market, most of the employment growth in January came from part-time roles. If the U.S. Labor Department methodology is used to calculate the unemployment rate in Canada, it remains unchanged at 4.8%. In the United States, employers added 353,000 jobs in January, the highest number in a year, and the unemployment rate held steady at 3.7%.
The central bank is keeping a close eye on wage growth in Canada as it poses an inflationary pressure. However, the pace of wage growth has slowed at the beginning of this year. Average hourly wages for permanent employees increased by 5.3% compared to the previous year, which aligns with economists' expectations and is lower than December's 5.7%. Despite this slowdown, wage growth remains high and continues to outstrip broader inflation, which unexpectedly rose to 3.4% in December.
Bank of Canada Governor Tiff Macklem acknowledges that achieving the target consumer inflation rate of 2% by 2025 will not be without challenges. During last month's policy meeting, where the benchmark interest rate was once again maintained, bank policymakers agreed that wage growth would gradually moderate. They based this decision on reports indicating that labor shortages were at normal levels and the economy had a surplus of supply compared to demand.
The central bank projects a sluggish economy in the first half of this year, with improvements expected in the second half. Previous rate increases have had a dampening effect on consumer spending, causing businesses to scale back investment and hiring plans. Inflation is projected to hover around 3% until mid-year.
Although the jobless rate in Canada has decreased, the employment rate - the percentage of the working-age population employed - has fallen for the fourth consecutive month. In January, it dropped by 0.1% to 61.6%, following a recent high of 62.5%.
The participation rate also saw a decline, decreasing by 0.2 points to 65.3%. Despite a stable workforce, the working-age population increased by 125,500 individuals during the month.
Hours Worked and Job Types
According to Statistics Canada's survey, total hours worked showed a monthly increase of 0.6% and a year-over-year increase of 1.1%.
In January, all job additions were in part-time employment, which saw a gain of 48,900 positions, while 11,600 full-time jobs were lost.
In terms of employment sectors, self-employment decreased for the month, while private-sector jobs remained relatively unchanged. However, the public sector drove employment growth, adding 47,600 jobs.
The services-producing sector experienced employment gains, including the first increase for wholesale and retail trade since last June. Other segments also saw improvements, such as finance, insurance and real estate, educational services, transportation and warehousing, and business, building, and support services.
Conversely, the goods-producing sector saw fewer jobs for the month due to losses in agriculture and construction, despite an increase in manufacturing positions.