Job growth stalled in December as the total number of jobs in Canada was virtually unchanged for the month and the unemployment rate held steady at 5.8 per cent for the final month of the year.
Statistics Canada said Friday in its monthly labour force survey that the economy added a total of 100 jobs in the final month of 2023.
The result came as the number of full-time jobs fell by 23,500 in December, offset by a gain of 23,600 part-time jobs.
Bank of Montreal chief economist Doug Porter said the report comes after months of job growth that seemingly “defied gravity” as economic growth slowed.
“The overall economy really has been struggling to grow and it was a bit of an oddity that employment had held up so well,” Porter said.
“But the softness that we’ve seen in the economy is now starting to catch up with the with the job market.”
The weaker job market conditions came as high interest rates continued to weigh on economic growth.
The Canadian economy shrank in the third quarter of 2023 at an annual pace of 1.1 per cent and growth was flat for a third straight month in October. Statistics Canada’s preliminary estimate for November also pointed to an increase in real GDP of just 0.1 per cent.
Tu Nguyen, an economist with accounting and consultancy firm RSM Canada, said the economy has turned a corner.
“Overall, the Canadian economy has entered a phase of stalling. A few months of challenging times are ahead before price stability is restored,” she said.
However, Nguyen said wage growth remains far above inflation.
Statistics Canada said average hourly wages in the month were up 5.4 per cent on a year-over-year basis compared with an increase of 4.8 per cent in November.
“This creates an interesting scenario for the Bank of Canada. The weaker-than-expected job report might accelerate the Bank’s decision to slash rates, but the hot wage growth does not ease concerns about sticky inflation,” Nguyen said.
The Bank of Canada held its key interest rate steady last month at five per cent.
In its summary of its deliberations, the central bank noted its governing council agreed that the likelihood that monetary policy was sufficiently restrictive to achieve its inflation target had increased, but still cautioned it was ready to raise rates if needed.
Porter, who is expecting the Bank of Canada to begin cutting interest rates in June, said the central bank would like to see the wage increase figures start to ease.
“I think ideally the bank would like to see those numbers moderating and instead they just picked up to 5.4 per cent,” Porter said.
“That’s well above inflation and really not showing any softening whatsoever and that alone would probably lead the Bank of Canada to be cautious about cutting interest rates.”
The Bank of Canada’s next interest rate decision is set for Jan. 24 when it will also release its latest monetary policy report.
The December jobs report showed the number of positions in the professional, scientific and technical services sector rose by 45,700 in the month, while the number of jobs in health care and social assistance climbed by 15,500.
The wholesale and retail trade sector lost 20,600 jobs in December, while the agriculture sector lost 17,700. The number of manufacturing jobs fell by 18,300.
Statistics Canada said overall employment growth slowed in the second half of 2023, averaging 23,000 jobs per month compared with 48,000 jobs per month in the first six months of the year.
This report by The Canadian Press was first published Jan. 5, 2024.