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February Job Gains Double Forecast As Unemployment Rate Ticks Up

Today’s StatsCanada Labour Force Survey for February was a mixed bag and shows the dramatic effect of surging immigration. Canadian employment rose by a much stronger-than-expected 41,000, dominated by a 71,000 rise in full-time jobs. 

The employment rate–the proportion of the population aged 15 and older who are employed–fell a tick to 61.5%. This is the fifth consecutive monthly decline, the most extended period of consecutive decreases since the six months ending in April 2009 during the global financial crisis. The Bank of Canada has emphasized the importance of the employment rate in recent commentary. 

The employment rate in February 2024 was down 0.9 percentage points from the recent peak of 62.4% observed in February 2023. This downward trend is associated with the unprecedented ballooning of the working-age population.

The unemployment rate increased 0.1 percentage points to 5.8% in February, offsetting the decline in January. The unemployment rate has held relatively steady in recent months, at 5.8% for three of the past four months. This follows an upward trend from April 2023 to November 2023, when the rate increased from 5.1% to 5.8%. The labour force participation rate—the proportion of the population aged 15 and older who were employed or looking for work—held steady at 65.3% in February.

The labour force jumped 76,000 last month and is up more than 550,000 in the past year, while the adult population has surged by more than 1 million people (+3.2%), compared with a job increase of 368,000. Even very strong job growth is not keeping up with the torrid influx of new workers, dampening wage inflation. 

Most of the new jobs were in the service sector, led by employment in accommodation and food services following a decline in the prior month. Also rebounding was employment in professional, scientific, and technical services. On a year-over-year basis, employment in this industry was up 85,000 (+4.6%), the second-largest year-over-year increase among industries, after transportation and warehousing (+104,000; +10.6%).

In February, average hourly wages were up 5.0% year-over-year, following an increase of 5.3% in January. This is still above the Bank of Canada’s comfort zone, although policymakers suggested that wage inflation appeared to have peaked in this week’s policy statement. 

Bottom Line

We will see one more Labour Force Survey on April 5th before the Bank of Canada meets again on April 10th. The all-important CPI inflation data will be released on March 19th. 

Today’s report, while strong, suggests that the surge in the working-age population and the decline in job vacancies could continue to temper wage inflation. The Bank of Canada will need more proof before it releases the brakes and lowers interest rates.