Stronger-Than-Expected September Jobs Report Reduces Prospect Of Larger Rate Cuts

Statistics Canada released September employment data today, showing a marked uptick in job growth and the first decline in the unemployment rate this year. Employment rose by 46,700 in September, following four months of little change.

Despite the employment gain, the employment rate—the proportion of the population aged 15 and older who is employed—fell 0.1 percentage points to 60.7% in September. The employment rate has been on a downward trend since reaching a recent peak of 62.4% in January and February 2023, as growth in the population aged 15 and older in the Labour Force Survey (LFS) outpaced employment growth.

Also, good news: The number of private sector employees increased for the second consecutive month, rising by 61,000 (+0.5%) in September and bringing the year-over-year increase in private sector employment to 193,000 (+1.5%). Public sector employment fell by 24,000 (-0.5%) in September but was up 3.0% (+128,000) compared with 12 months earlier. Self-employment changed little in the month and on a year-over-year basis.

Full-time employment rose by 112,000 (+0.7%) in September, the most significant gain since May 2022. The increase was partially offset by a decline in part-time work (-65,000; -1.7 %).

The unemployment rate fell for the first time since January—a mere 0.1% decline, but we’ll take it, and now stands at 6.5%. This follows a rise of two ticks in August. The jobless rate is well above the 4.9% cycle low when job vacancies were rampant. Discouraged workers have dropped out of the labour force. The labour force participation rate is down 0.7 percentage points year-over-year.

Wage inflation is a big issue for the Bank of Canada, and this time, average hourly wages increased by 4.6%, down from the August rate of 5.0%.  Other measures of wage inflation are now even lower.

Bottom Line
Economists are still divided on whether the Bank of Canada will cut by 25 or 50 basis points. Next week’s inflation data, released on Tuesday, October 15, will become all the more critical. The numbers are expected to be good, meaning low. The economy slowed markedly in the third quarter, and monetary policy remains overly restrictive. Stay tuned!