Canada’s job market showed improvement in November as the unemployment rate declined to 6.5%, reaching a 16-month low, according to Statistics Canada. Economists suggest that this decrease makes the possibility of an interest rate cut at the year-end less likely.
The jobless rate dropped from 6.9% in October after a trend of increase throughout the year, reaching as high as 7.1% in September, the highest since May 2016 excluding the pandemic years. Chief economist Douglas Porter from BMO noted the significant drop in the unemployment rate, comparing it to the tech boom in 1999.
A reduction in population growth leading to a smaller labor force was identified as a major factor contributing to the decline in the jobless rate. Additionally, the economy added 54,000 jobs unexpectedly in November, with most being part-time positions. Growth was primarily seen in the private sector, particularly among individuals aged 15 to 24, who experienced a decrease in the unemployment rate to 12.8%.
Various sectors such as health care, social assistance, accommodation, and food services contributed to job growth, while losses were observed in wholesale and retail trade. Alberta saw the most significant job gains, adding 29,000 jobs, with New Brunswick and Manitoba also adding several thousand jobs each. On an annual basis, the average hourly wages increased by 3.6% to $37.00.
The positive job market data, along with recent strong economic indicators, including Q3 GDP results, has led experts to believe that a Bank of Canada rate cut is unlikely in the near future. Analysts suggest that the recent labor market improvements solidify this decision, indicating that the Bank of Canada may not need to reduce interest rates throughout the upcoming year.
The Bank of Canada is scheduled to announce its next interest rate decision on Wednesday.