Canada’s unemployment rate is up for the first time in seven months, which means that high interest rates have (done what they do and) thrown cold water on the red hot labour market.
- The unemployment rate rose to 5.4% from record lows of 4.9% in July, which is still one of the lowest rates since Stats Canada started gathering the data in 1976.
- The economy also lost almost 40,000 jobs last month, thanks to a drop in education (which may stabilize as teachers return to work), construction and public sector jobs.
Why it matters: The Bank of Canada might look at these rising unemployment numbers and pull back on the fast pace of rate hikes (this week, the overnight rate increased to 3.25%).
- Many economists are already forecasting no more than a 0.5% hike at the next interest rate announcement, which will happen on October 26.
Yes, but: They also might not. Wage growth is ahead of where it was a year ago and picking up pace, which the BoC could take as a sign that there’s still plenty of room to raise rates.
- “The longer-term trend in wage growth confirms the impression that the job market remains very tight. Add in poor productivity growth and the combination of the two is disconcerting if the aim is to get the cost of living under control,” Scotiabank Economics VP Derek Holt wrote in a recent note.
Bottom line: It’s still too soon to say how much higher rates will go, but this softening of the job market is exactly what the Bank of Canada has on its vision board.