Unemployment rate remains steady, labour market resists economic slowdown
With the labour market remaining relatively tight, average hourly wages were up 5.2 per cent on a year-over-year basis, growing faster than inflation.
The Canadian labour market is showing no signs of the slowdown the Bank of Canada is hoping for, as the economy added more jobs last month and wage growth outpaced inflation.
Statistics Canada reported on May 5 that employment rose by 41,000 jobs in April, but with all the gains made in part-time work.
Meanwhile, the unemployment rate held steady at 5.0 per cent for the fifth consecutive month. That’s just above the all-time low of 4.9 per cent reached last summer.
TD director of economics James Orlando says the details in the jobs report are “mixed.” The economy continued to add jobs, but only part-time work. Moreover, population growth has been propping up employment numbers for months as Canada welcomes more immigrants.
The job gains in April were led by the wholesale and retail trade industry, while the largest losses occurred in business, building and other support services.
With the labour market remaining relatively tight, average hourly wages were up 5.2 per cent on a year-over-year basis, growing faster than inflation.
The annual inflation rate in March was 4.3 per cent and is expected to fall to about three per cent by mid-year.
The continued strength in the labour market is pushing the Bank of Canada to remain hawkish in its communications, even as it holds its key interest rate steady.
The central bank has been warning that a tight labour market will make it more difficult to get inflation back to its target of two per cent, as higher wages could put upward pressure on prices.
Last month, the Bank of Canada’ governing council discussed raising rates again, but opted to remain on hold.
Orlando says if the economy continues to resist the slowdown the Bank of Canada is trying to engineer, interest rates may not be high enough.
“Maybe the Bank of Canada has to reassess what the proper level or the policy rate is to actually bring the economy to the economic slowdown that’s needed to get inflation back (down),” Orlando said.
The central bank paused its aggressive rate hiking cycle earlier this year and has been holding its key interest rate at 4.5 per cent.
Higher borrowing costs should force people and businesses to pull back on spending, and employers to rethink their hiring plans, but so far, the labour market has remained resilient.
