Ella 
Canada’s economy surpassed expectations by adding 63,800 jobs in September, accompanied by continued wage increases, bolstering the likelihood of another interest rate hike.
Statistics Canada reported that the unemployment rate held steady at 5.5% for the third consecutive month. Analysts polled by Reuters had anticipated a net job gain of 20,000 and a slight uptick in the unemployment rate from 5.5% to 5.6% in August.
The average hourly wage for permanent employees increased by 5.3% compared to September 2022, up from the 5.2% annual rise in August.
Michael Greenberg, a portfolio manager for Franklin Templeton Investment Solutions, commented, “That employment report today really blew away market expectations. Wage growth is also beating market expectations.”
Despite the Bank of Canada’s aggressive rate hikes, the strong demand and ongoing hiring by companies suggest the possibility of another rate hike in November or December.
The central bank, which has raised rates ten times in the past 18 months, has emphasized the challenge of fully curbing inflation if wages continue to rise between 4% and 5% annually.
The monthly, seasonally adjusted, and annualized gain for average hourly wages of permanent employees was 8.3% in September, according to Derek Holt, vice president of capital markets economics at Scotiabank.
“With wage numbers like this and the absence of a soft patch on core inflation measures in Canada, I would think we’re still in hike mode in October,” Holt said.
Following the release of the job figures, money markets increased their bets on a rate hike later this month, with a 38% chance compared to 28% before the data.
The Canadian dollar dipped 0.1% to 1.3718 per US dollar, while the Canadian 10-year yield rose 12 basis points to 4.255%, near a 16-year high.
Canada’s labor market, supported by strong immigration, has remained resilient even as the Bank of Canada raised its key overnight rate to a 22-year high of 5% to cool the economy.
Statscan noted, “The upward trend in employment continues to occur in the context of the highest rate of population growth since 1957,” with the population aged 15 and older increasing by 82,000 in September.
The Bank of Canada will announce its next policy decision and update its economic forecasts on October 25.
With robust gains in September, the economy is averaging 30,000 monthly employment growth this year, up from 25,000 a month earlier.
Part-time employment growth, outpacing full-time work this year, contributed to the gains in August, with a net addition of 48,000 positions in the month. Employment in the services sector increased by a net 74,300 jobs, primarily in educational services, offsetting the loss of 10,500 positions in the goods sector.
