Canada added 14,500 jobs in October and wages of permanent employees rose, as the economy grappled to absorb the slack built up due to a rapidly rising population amid an overheated market. The unemployment rate stayed unchanged from September but hovered around a 34-month high of 6.5%, Statistics Canada said. Analysts had estimated a net addition of 25,000 jobs and the unemployment rate to edge up to 6.6%.
Implied probabilities in overnight index swaps markets Friday put the odds of a 50 basis point rate cut on Dec. 11 at about 60%, and about 40% for a 25 basis point cut.
That’s similar to where probabilities stood just prior to the jobs data being released. But on Thursday, markets were evenly split on whether it will be a 50 or 25 basis point cut. And earlier this week the market-implied odds were favouring only a 25 basis point cut.
The second table to the bottom is a breakdown of probabilities for the size of a cut on Dec. 11.
And here where the probabilities stood Thursday afternoon:
Many economists, though not all, are also now bracing for a 50 basis point cut next month. Here’s how they are reacting in written commentaries to Friday morning’s jobs data:
Andrew Grantham, senior economist with CIBC
David Rosenberg, founder of Rosenberg Research
All in, a very mixed report. The headline miss did mask some positive news beneath the surface such as the gain in full-time employment and the expanded workweek. At the same time, the elevated jobless rate and depressed employment-to-population ratio, while emblematic of a labor market in excess supply, somehow is not being reflected in decelerating wage growth, which is a true mystery. Whatever view you have on the BoC or on the loonie, the internals of this report shouldn’t be changing your forecast — there were simply far too many moving pieces to draw a firm conclusion on anything.
Nathan Janzen, assistant chief economist, Royal Bank of Canada
October marked a second straight month of headline labour market data that was better than feared – particularly the unemployment rate holding steady after ticking lower in September. But details were once again softer than headlines would suggest. Hiring demand has continued to slow with job openings falling and we continue to think the most likely near-term path for the unemployment rate is higher rather than lower.
We continue to think there is more urgency for the Bank of Canada to respond to a underperforming Canadian economy (and slowing inflation pressures) with larger and more interest rate cuts than other advanced economy central banks. Our base-case forecast assumes the BoC will cut the overnight rate by another 50 basis points in December.
Thomas Ryan, North America economist, Capital Economics
The muted rise in employment in October was even weaker than it seems, as, like in September, it was propped up by strong gains in youth employment. While the unchanged unemployment rate will reassure the Bank that the floor isn’t completely falling from under the labour market, this weak job gain paired with the recent slew of weak activity data reinforce our view that the Bank will cut interest rates by 50bp at its December meeting.
At first glance, the 14.5k rise in headline employment doesn’t seem that bad, even if it is a big slowdown from the 46.7k gain the month before. However, employment was propped up by another strong 33.0k rise in employment for those aged 16 to 24, whereas prime-age employment (25-54) fell by 11.1k. This casts doubt on our view that youth employment rose so strongly in September because of a seasonal quirk. Elsewhere, the Bank has said that it will be taking its cue on pace of interest rate cuts from the strength of private sector hiring, so the slightly healthier 20.5k rise in private sector employees in September will be reassuring for the Governing Council, although that is still weak versus September’s standards.
Population growth remained elevated last month at 85.2k, but again that did not translate into a strong rise in the labour force which only grew by 15.4k, keeping the unemployment rate at 6.5%. Finally, even though the Bank seem to be more concerned about the downside risks to inflation, the tick-up in annual average hourly earnings growth to 4.9%, from 4.5%, suggests that elevated price pressures must remain a consideration.
James Orlando, director and senior economist, TD Economics
Another solid jobs report in October. Job gains were concentrated in full-time positions, with the cyclically sensitive private sector pulling the weight. Employees were working more hours and saw wage growth increase. Not to mention, we are seeing employment for youth starting to bounce back. All told, this report speaks of a labour market that continues to exude decent strength.
To cut by 50 bps or 25 bps? That’s the question for the Bank of Canada. It recently accelerated the pace of rate cuts, with inflation stabilizing around the 2% target. Yet the labour market hasn’t been forcing the BoC’s hand. Today’s report should encourage the bank to revert back to a 25 bp cut in December (our call), even if it means eating some crow on its one off 50 bp move previously. That said, if it is dead-set on getting its policy rate back into its neutral range (2.25% to 3.25%) by year-end, a 50 bp move would be the choice. Investors are uncertain which way the BoC will go, and given recent rhetoric from the central bank, it too doesn’t seem to know which way it will go either.
Douglas Porter, chief economist, Bank of Montreal
Nick Rees, senior FX market analyst, Monex Canada (foreign exchange firm)
Tu Nguyen, economist with assurance, tax & consultancy firm RSM Canada
The October job market was in line with the trend of a weak job market, with only 15,000 jobs added. …Following two months of strong private sector growth, October saw little business hiring. While we expect the 50-basis point cut from the Bank of Canada to stimulate the market somewhat, the policy rate remains restrictive. A measurable uptick in hiring will only come in early 2025.
The Bank of Canada will continue cutting rates at every meeting, including a 25-basis point cut in December, until they reach the terminal rate of 2.75% in the first half of 2025
In particular, labour force participation rate has been falling among youth amid a lackluster hiring environment, steering youth to pursue education rather than entering the workforce. But layoffs have also been rare, which is why the participation rate among core-aged workers remains comparable to the pre-pandemic years of 2017 to 2019.
Charles St-Arnaud, chief economist, Alberta Central credit union
Overall, the report shows that the labour market returned to its weak trend after some strength in September, with job gains remaining modest relative to population growth. Moreover, there continue to be signs of weakness, with participation and employment rates reaching their lowest levels since the late 1990s, and the unemployment rate remains elevated. We continue to believe that the BoC cut it policy rate by 50bp at the December meeting. However, whether the BoC will want to continue its accelerated path to neutral remains to be seen and may depend on the next CPI release.
Matthieu Arseneau and Alexandra Ducharme, economists with National Bank Financial
In October, the increase in employment was still insufficient to stabilize the ongoing deterioration in the labour market, while the population continued to grow at a frenetic pace. In fact, the 15K jobs created fell well short of the 51K needed to stabilize the employment rate, which has seen a sixth consecutive fall and is now down 1.8 percentage points from its peak in 2023. Although a decline in the employment rate is expected in the context of an ageing population, the speed of the recent decline signals a clear cooling in the labour market. Moreover, the employment rate for the 25-54 age group recorded its 3rd consecutive fall in October. Meanwhile, the employment rate for young people has rebounded slightly over the last two months, but remains at levels not seen since 1999, excluding the pandemic. We should thus not be too quick to celebrate the stability of the unemployment rate, as it has been sustained in part by a further drop in the participation rate, possibly reflecting discouragement among job seekers. Although young people have been particularly hard hit during this labour market downturn, the unemployment rate for the main cohort of workers (aged 25-54) has risen to its highest level since September 2017, excluding the pandemic. The labour force survey also suggests that wages have not yet softened, but given the current trends, it may only be a matter of time before they do. The private sector stalled in October after a jump in the previous two months, and the next few months do not bode well. Recently released job vacancy data does not point to a wave of hiring in the coming months; in fact, the private sector vacancy rate fell this summer to its lowest level since 2016. Furthermore, the Bank of Canada’s Business Outlook Survey published in October shows no sign of stabilization in the short term. Indeed, hiring intentions were virtually unchanged in Q3 and remained below the historical average. Such a weak appetite in a context where the pool of workers is growing at a staggering rate does not bode well for a stabilization of the labour market. All in all, we remain concerned about further deterioration in the months ahead as monetary policy remains restrictive.
Derek Holt, vice-president & head of Capital Markets Economics, Scotiabank
Canada registered an ok set of numbers that offer mixed perspectives on the labour market and economy. As a result, rates and FX markets largely looked the other way post-data. We’re left with no further information to judge the outcome of the Bank of Canada’s next decision on December 11th. What may tip the balance on whether they may cut 25bps or 50bps again will be another jobs report in early December, the next CPI report, and a wave of GDP figures.
Bryan Yu, chief economist, Central 1 credit union
Today’s report was largely neutral in our view given little movement among indicators and is unlikely to sway the Bank of Canada in its rate decision. The mix of positive job growth but persistent labour market slack will keep the Bank on its cutting path, however, wage growth remains relatively sticky. While wage growth is expected to ease, there is an upside risk given the federal government’s target to severely reduce immigration and reverse the inflow of non- permanent residents. This will likely tighten the labour market in 2025/26. Adding to inflation risk is the return of a Trump administration which is likely to be inflationary. We view the December meeting to yield a 25-basis point cut, but there is more data to come to inform that decision.
