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Canada’s unemployment rate unexpectedly fell again and the economy posted solid job gains, data showed on Friday, in signs that joblessness was starting to ease from an eight-year peak, barring the pandemic years, in November.
The January unemployment rate was 6.6%, a notch below the 6.7% seen in the prior month, and the economy added a net 76,000 jobs, down from a revised 91,000 jobs added in December but still a robust gain.
Analysts polled by Reuters had forecast net additions of 25,000 jobs in January and an unemployment rate of 6.8%.
This was the second month in a row that the unemployment rate, or the number of jobless people as a percentage of the total labor force, declined. However, the total number of unemployed people stayed at a high of 1.5 million and joblessness still continues to be elevated.
“This indicates that many unemployed people are facing continued difficulties finding employment, despite recent employment growth,” Statscan said.
Canada’s economy has been teetering for most of last year, as large interest rate cuts failed to boost consumer spending and business investment.
However, the central bank said last month that while the job market remained soft, there were signs of improvement, as a total of 200 basis points of quick rate cuts was helping business activity to pick up and boosting consumer spending.
A looming threat of tariffs from the United States and a sharp drop in immigration numbers, however, are likely to impact economic activity, and businesses have reported soft hiring intentions for the year, a Bank of Canada survey showed last month.
Economists have said that if tariffs are imposed, the BoC will have to continue to cut rates.
Andrew Grantham, senior economist with CIBC Capital Markets said that even though the unemployment rate has been falling, it was still elevated and indicated slack in the economy.
“We continue to think that even lower interest rates will be needed for the economy to fully absorb that slack, particularly given heightened trade uncertainty which could impact hiring decisions ahead, ” he said.
The Canadian dollar was trading up a slight 0.1% to 1.4296 U.S. dollar, or 69.95 U.S. cents.
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The job report shrunk the currency swap market bets for a rate cut of 25 basis points in March to 58% from 72% earlier.
The number of job additions were largely balanced between part-time and full-time positions, Statscan said, adding that the gains were primarily seen in manufacturing, professional, scientific and technical services.
Employment amongst youth or those in the age group of 15 to 24, a category that had been chronically weak most of last year with a high unemployment rate, increased by 1.1%. The unemployment rate in this category dropped to 13.6% from 14.2%, Statscan said.
The average hourly wage growth for permanent employees was at 3.7%, slightly down from the revised 3.8% in December. The wage growth rate, which is closely watched by the BoC to gauge inflationary trends, had been slowing.
The employment rate, or the proportion of the population aged 15 and older who are employed, increased 0.1 percentage points to 61.1% in January, marking the third consecutive monthly increase, Statscan data showed.
(Reporting by Promit Mukherjee; Editing by Dale Smith, Mark Porter and Nick Zieminski)
