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Canada added a fewer-than-expected 14,500 jobs in October and wages of permanent employees rose, data showed on Friday, as the economy struggled to absorb the slack built up due to a rapidly increasing labor force.
The unemployment rate stayed unchanged from September but hovered around a 34-month high of 6.5%, Statistics Canada said.
Analysts polled by Reuters had estimated a net addition of 25,000 jobs and the unemployment rate to edge up to 6.6%.
Canada’s business investment and hiring have been muted even after four rounds of rate cuts as high interest rates and inflation have throttled demand, and as the labor force has continued to grow, fueled by immigration, which crossed 7% of the overall population in the third quarter, an all-time high.
This has increased the number of people in the labor force seeking jobs and not landing any, resulting in a steady fall in the employment rate, or the number of people employed out of the total working age population of 15 years and above.
Canada’s labor force has swelled by 2.4% since last year but the employment rate shrunk to 60.6% in October, its sixth consecutive monthly decline, Statscan said.
“The October jobs report is very much consistent with an economy that is still grinding out modest growth, and wage gains that are slightly hot for comfort,” Doug Porter, chief economist at BMO Capital Markets, wrote in a note.
Bank of Canada Governor Tiff Macklem said last month after the rate cut decision that layoffs had remained modest but business hiring had been weak, and that has hit young people and newcomers to Canada.
However, Macklem expressed hope that continued interest rate cuts would help to grow the economy and increase employment.
The jobless rate amongst those aged 15 to 24 fell 0.7 percentage point in October to 12.8%, the statistics agency said, adding that the employment rate for this group rose for the first time since April.
The Bank of Canada has reduced its key policy rate by a cumulative 125 basis points to 3.75%, with a super-sized cut of 50 basis points last month, in a bid to prop up economic growth and absorb the excess labor supply.
Financial market bets for a rate cut of 50 basis points on Dec. 11 fell to 58% from 62% before the jobs report was released.
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The Canadian dollar extended losses and weakened by 0.41% to 1.3918 to the U.S. dollar, or 71.85 U.S. cents. Yields on two-year government notes rose 0.3 basis point to 3.072%.
The average hourly wage growth of permanent employees rose to an annual rate of 4.9% in October from 4.5% in September, the agency said.
The wage growth figure is closely watched by the BoC and a rise could dissuade against another deeper cut next month, economists said.
There will be one more jobs report, inflation and GDP data before the next rate decision.
The increase in jobs came entirely from full-time employment, while part-time employment shrunk. The additions were broad based with both the goods-producing sector and services sector showing healthy growth.
(Reporting by Promit Mukherjee and Dale Smith; Editing by Andrea Ricci and Mark Porter)
