Canada’s economy added almost three times the number of jobs expected in August as wage growth accelerated, latest labour data has shown.
The data, which were released on the weekend, show sign of underlying strength despite high interest rates. Canada created 39,900 jobs, compared with a median forecast gain of 15,000.
As a result, Canada’s unemployment rate remained at 5.5 per cent. The labour market has been resilient even as the Bank of Canada raised its key overnight rate 10 times since March 2022 to cool the economy.
The average hourly wage for permanent employees, a figure the central bank watches closely, rose by 5.2 per cent from August 2022 compared to a year-on-year increase of 5.0 per cent in July. The Canadian Central Bank has repeatedly expressed concern that it will be hard to fully curb inflation if wages maintain their current patterns of rising between 4.0 per cent and 5.0 per cent annually.
“Showing that uptick on a year-over-year basis was not anticipated and I think that will not give the Bank of Canada a great degree of comfort,” declared Andrew Kelvin, chief Canada strategist at TD Securities.
Importantly, Canada’s gross domestic product unexpectedly shrank an annualized 0.2 per cent in the second quarter, a sign the economy could have already entered a recession as higher rates sink in. Central Bank Governor, Tiff Macklem told the nation that he did not think the economy had entered a recession.
Possible recession
Last week, OUR Today reported the Canadian economy fell at an annualised rate of 0.2 per cent in the second quarter of 2023, led by a drop in housing investment and a pullback in consumer spending. Economic growth was flat in July, data showed on Friday, which would probably allow the Bank of Canada to hold rates amid a possible recession.
The second-quarter reading was far lower than the bank’s forecast for a 1.5 per cent annualised economic growth as well as the 1.2 per cent gain expected by analysts.
June economic growth declined 0.2 per cent from May was in line with forecasts but Statistics Canada is reporting that the second quarter economic numbers came in well below both the central bank’s estimates, indicating that higher interest rates may be weighing on economic activity more than previously appreciated.
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