Business & Investment

Canada’s employment growth is far higher than expected, more than quadrupled

Kevin Carmichael: Further evidence that the economy is on track to complete its comeback by early next year

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Canadian employers added 154,000 jobs in November, and the unemployment rate plummeted to 6%. This is further evidence that the economy is on track to complete its recovery from the COVID recession early next year.

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Statistics Canada Monthly labor force survey If the number of working Canadians is 19.3 million, it will increase by 1% from February 2020 to the level of employment that the economy was doing well to achieve by the end of 2021 if the pandemic did not thwart the trend. Become. The unemployment rate was around 5.5% prior to the COVID crisis, but the 6% unemployment rate is approaching normal. Another indicator comparing the working population to the total population is the employment rate of 61.4%, the highest level since 61.8% in February 2020.

The numbers should increase confidence in Canada’s recovery, as both increased employment and a significant drop in unemployment far exceeded the expectations of private predictors. Prior to the latest report on Statistics Canada’s labor market, Bay Street’s consensus was an increase in employment of about 40,000 and an unemployment rate of about 6.5 percent. The Canadian dollar surged 0.5 cents in just a few seconds after the number of jobs was announced at 8:30 am as traders compared Canada’s data with disappointing numbers in the United States. I expected.

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“I felt that a significant portion of the working population was left behind from the recovery,” said RSM International Ltd, a global audit and consulting firm. Tu Nguyen, economist at RSM Canada LLP, a unit of RSM Canada, said. “November data show that there are so many positive trends that ultimately these workers are looking at the light at the end of the COVID tunnel.”

Indeed, the short-term outlook is clouded by the emergence of Omicron variants and the devastating floods in British Columbia. But because everything is the same, November employment increases the likelihood that the Bank of Canada will raise interest rates early next year to counter the strongest inflation surge since the early 1990s.The report also claims reductions Government spending on stimulus Many of the “guardrails” that Treasury Minister Chrystia Freeland said will guide the response to the crisis show that rescue missions can be completed.

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Total working hours, one of the more detailed data points that Freeland said will drive spending, increased 0.7% from October, returning to pre-pandemic levels for the first time. Youth employment, another freeland guardrail, was 2.6 million in November, similar to February 2020.

Arlene Kish, Director of Economics for Canada at IHS Markit, a financial data company, said: “This makes it more likely that the Bank of Canada will start raising interest rates sooner than IHS Markit. It is expected to take off in July.”

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Bank of Canada Governor Tiff McClem said he would like to adjust for a “full” recovery from the recession, suggesting that most labor market indicators tend to keep interest rates low until they exceed pre-pandemic levels. doing. But in October, when the central bank abruptly ended its bond-buying program, he expressed growing concern about inflation. The central bank expected that upward pressure on prices would weaken by 2021 as companies and logistics companies struggle to balance the extreme mismatch between supply and demand, but it could continue next year. Admitted that it was high.

Macklem and his agents are particularly interested in updated wage data. This is because it tends to correlate with inflation. It is currently difficult to track wage growth as the pandemic distorts typical employment patterns and makes comparisons a year ago difficult. Statistics Canada has been trying to smooth the data in recent months using 2019 as a benchmark. This approach suggests that the average hourly wage in November increased by 5.2% from two years ago. This is about the same as the rise in the consumer price index during that period.

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There is evidence that wages can do so soon, even if they haven’t caused inflation yet. According to Statistics Canada, wages for new employees are 8.5% higher than they were two years ago, while wages for off-the-shelf employees are only 2.3%. This suggests that as an employer, changing jobs can cause inflation. report The number of vacancies in September exceeded 1 million, the highest ever. Industries that have avoided structural changes that affect industries that have been forced to close because they remained largely open during the pandemic are also experiencing wage pressures compared to a year ago. For example, Statistics Canada’s latest figures show that the average weekly income in the transportation and warehousing industry increased by 6.3% in September, while the average from January 2010 to February 2020 was about 4% year-on-year. Increased.

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“The labor shortage is expected to get worse,” said Naisan Janzen, an economist at the Royal Bank of Canada. “A labor shortage means that increased demand for employment is expected to appear in wages that exceed trends, rather than future increases in employment.”

The Bank of Canada said in October that it could raise benchmark rates in April, three months earlier than previous guidance. Macklem and his advisers were surprised that the consumer price index was approaching 5% year-on-year, well above the central bank’s comfort zone of 1% to 3%.

“Today’s data will help the Bank of Canada get its continuation off the ground. Normalization Ima Sammani, a foreign exchange analyst at Monex Group, a global payment processor, said:

• Email: kcarmichael@postmedia.com | Twitter:

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Canada’s employment growth is far higher than expected, more than quadrupled

https://financialpost.com/news/economy/canada-job-gains-blow-past-expectations-more-than-four-times-expectations Canada’s employment growth is far higher than expected, more than quadrupled

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