Canada’s labor market is taking a break from its slowing trend in September

Canada’s labor market bucked its slowing trend in September, adding 47,000 new jobs. In addition to the good news, the increases were exclusively in the full-time sector (+112,000) and the private sector (+61,000). Meanwhile, part-time jobs gave back their gains from August (-65,000).

The job gain was strong enough to cut the unemployment rate by a tenth to 6.5%, the first improvement since January. Labor force growth was moderate in September (+16,000), as the participation rate fell by two tenths to 64.9%.

Across sectors, employment increases were concentrated in the areas of information, culture and leisure (+22,000, 2.6%), wholesale and retail trade (+22,000, 0.8%) and professional, scientific and technical services (+21,000, 1.1 %).

The unemployment rate fell in September, driven entirely by youth. The unemployment rate for 15- to 24-year-olds fell by a full percentage point to 13.5%, but is still 2.8 percentage points higher than a year ago. Perhaps even more telling is that the proportion of the core population of working age (25-54 years) who has a job continued to decline. Compared to the beginning of 2023, it has fallen by 1.6 percentage points.

In a gray cloud of the report, total hours worked fell again in September (-0.4% month-on-month) and rose 1.2% last year. Wage growth cooled to 4.6% year-on-year in September.

Important implications

A decline in Canada’s unemployment rate is good news, and the two-year bond yield has risen by a few tenths on the news. However, the September jobs report does not change the picture of a labor market that has cooled significantly since the Bank of Canada began raising interest rates. The data rarely moves in a straight line and we would need to see a few more months of strength before we can declare an uptrend.

The Bank of Canada’s next interest rate decision is less than two weeks away and another rate cut is widely expected. Some market participants are leaning toward a larger half-percentage point move after the Fed’s larger cut, but September’s jobs data will likely trim those bets somewhat. We expect another quarter point rate cut on October 23rd.