Canada creates hardly any jobs in December, wage growth picks up

Canada’s economy added far fewer jobs than expected in December and the jobless rate remained at 5.8%, but permanent employees’ wages increased at the fastest pace in three years, data showed on Friday.

The economy added just a net 100 jobs last month. Analysts polled by Reuters had forecast a net gain of 13,500 jobs and the unemployment rate to tick up to 5.9% from 5.8% in November.

The average hourly wage growth for permanent employees – a figure closely watched by the central bank – accelerated to an annual rate of 5.7% in December – the highest since January 2021 – from 5.0% in November, Statistics Canada said.

“The main story here is we are seeing some cool down in the job market,” said Doug Porter, chief economist at BMO Capital Markets. “The one disturbing aspect for the bank is that average hourly wages took a big step up in the month.”

The Bank of Canada (BoC) has said wage growth in the 4% to 5% range or higher would hinder its efforts to sufficiently cool inflation.

The Canadian dollar weakened to a 17-day low after the data, fetching 74.6435 U.S. cents. The Canadian jobs figures were released at the same time as U.S. data, which showed the economy there added more workers than expected in December, more than had been forecast.

Wage growth in Canada has remained strong even though job growth has eased in recent months as the economy slows under the impact of the BoC’s 10 rate hikes between March 2022 and July 2023.

The BoC has left its key policy rate on hold at a 22-year high of 5% since July as it weighs whether rates are high enough to bring inflation back to a 2% target.

But with inflation slowly ticking down and an unexpected contraction in third-quarter gross domestic product, money markets and economists expect the bank to start cutting rates in the first half of 2024.

Canada’s economy averaged 23,000 monthly employment growth in the last six months of 2023, compared with an average of 48,000 per month in the first half of last year, Statscan said.

In December, employment in the goods sector decreased by a net 42,900 jobs, driven by job losses in manufacturing, agriculture and construction.

Those losses were balanced out by a net 43,100 positions gained in the services sector, led by increases in professional, scientific and technical services as well as health care and social assistance.

The central bank’s next rate announcement is on Jan. 24, after the release of December inflation data on Jan. 21.

BoC Governor Tiff Macklem, in an interview with BNN TV last month, said the bank could start cutting rates in 2024 as long as core inflation comes down as predicted.