economy
01. economy Canada's unemployment rate remains historically low—though plenty of indicators are pointing to a labour market that is beginning to buckle under the weight of the current interest rate regime.
SIGNS OF TURBULENCE AHEAD
The Canadian labour market has been performing remarkably well over the past year and a half. In the face of an unprecedented rate tightening cycle from the Bank of Canada, the unemployment rate nationally, at 5.5%, remains near its all-time low (of 4.9%). And while the labour market continues to be robust by most metrics, there are some signs that it has begun to sag as high interest rates work their way through the economy. Over the past four months, most labour market metrics have softened nationally, and particularly when compared with the four months prior. Growth in the number of employed persons has slowed, even as population growth continues at an historic pace, with August alone adding 100,000 people aged 15+. The number of unemployed persons has been increasing at a greater rate of late, while the unemployment rate has risen in three of the past four months.
Further, the job-changing rate has been declining at a quicker pace of late (which we’ll explore in greater detail later in this report), as have job vacancies. Meanwhile, the number of people collecting EI payments has been increasing in the past four months. Wage growth, on the other hand, has increased in the most recent month, though time will tell if this is a fluctuation or a reversal of trend (or a composition effect discussed later on). The Bank of Canada is monitoring wage growth closely, as this is a potential headwind to getting inflation back to target. These changing labour market dynamics are something that we, and the Bank of Canada, will be watching closely. Needless to say, a weakening labour market is something to be concerned about. That being said, with the zeitgeist being dominated by inflation and high interest rates, a little job market softness is exactly what the Bank of Canada is hoping for.
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