Canada’s Jobless Rate Hits 6.8% in November Despite Employment Gains
Canada’s unemployment rate climbed to 6.8% in November, marking the highest level since January 2017, excluding the pandemic years. While the economy added 51,000 jobs last month—mostly in full-time positions—the surge in the labour force participation rate pushed unemployment higher.
Statistics Canada’s latest labour force survey revealed a 0.3 percentage point increase in participation, reflecting more working-age individuals seeking employment. This growth in job seekers outpaced the available opportunities, leading to the uptick in unemployment from 6.5% in October.
A Mixed Labour Market
James Orlando, Director of Economics at TD, called the data “messy,” as the rise in unemployment contrasted sharply with the positive job creation numbers. “A 50,000 job gain would normally signal strong growth, but the labour force’s sudden expansion is driving the higher jobless rate,” Orlando explained.
The report also highlighted longer periods of unemployment for many Canadians. In November, 46.3% of unemployed individuals had been without work for over a year or had never worked, a significant rise from 39.5% a year ago.
Interest Rate Cuts on the Horizon?
The mixed labour market data has shifted expectations toward a larger interest rate cut from the Bank of Canada. Financial markets now heavily anticipate a half-percentage point reduction in the central bank’s key interest rate, currently at 3.75%.
Douglas Porter, Chief Economist at BMO, noted that while their forecast now aligns with a 0.5% cut, this reflects the bank’s likely course of action rather than their recommendation. “The high jobless rate provides them with a ready invitation to ease quickly,” Porter stated.
The Bank of Canada last reduced its policy rate by 0.5% in October, citing cooling inflation and sluggish economic growth. However, Governor Tiff Macklem has maintained a cautious stance, emphasizing that future rate decisions will depend on economic data.
Economic Outlook
Despite rising unemployment, some indicators suggest the Canadian economy remains resilient. Employment gains continue, consumer spending has shown relative stability, and the housing market is expected to recover in 2024.
Orlando emphasized that the central bank must focus on forward-looking policies: “If you’re a central bank, you want to set policy for the future, not necessarily for yesterday.”
High interest rates, however, have undeniably weighed on the labour market, with employers reducing hiring and cautious investment further cooling job creation.
Source : The Canadian Press
