Canada adds 150,000 jobs in January defying expert projections

The economy of Canada gained 150,000 jobs in the month of January, ten times the media projection by the Bloomberg Survey. The rate of unemployment remained steady at 5%, a record low as reported by Statistics Canada.

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The Economists had forecasted a meager gain of 5,000 jobs in Canada. However, nearly 70,000 jobs were added by employers. Employment in Canada increased much speedier than anticipated. It has resulted in questions if the Bank of Canada has truly completed an increase in rates of interest.

The constant growth of employment in Canada

January was the 5th consecutive month of growth in the labor market in Canada which is continuously defying all slowdown predictions. It has resulted in economists being caught on the wrong foot. The demand for workers only seems to accelerate all thanks to the policy of Prime Minister Trudeau. It has opened the gates even wider for new migrants, overseas students, and provisional workers.

Since September 2022, the economy of Canada has added 326,000 jobs increasing the number of employed Canadians to 20 million plus for the first time. Doug Porter Chief Economist at the Bank of Montreal said in a report to investors that the job market is sending exactly nil signs of economic strain.

The latest statistics imply that the tight labor market in Canada continues to expand at a hot pace unsustainably. The figures in December added stronger than projected other data encouraged a potential final hike in interest rates in January by the Central Bank. A pause was declared by policymakers while assessing the state of the economy.

Tiff Macklem the Governor has raised the lending rate overnight by 425 base points in less than 12 months. He has said that he estimates the impact of the higher rates for dragging economic growth to nearly zero in the first 3 quarters of 2023.

Canadian economy surpasses expert projections

The central bankers in Canada stressed that they require an accumulation of proof if the economy was not progressing on the path of confirmation of their projections. The latest statistics are huge evidence that it is not following its path, said Desjardins Securities’ Head of Macro strategy Royce Mendes.

The massive job growth enhances the prospects that BOC will have no option but to deliver one more quarter-% increase in points. Swap markets traders have placed odds at a further 25 points increase at around 3 quarters by summer from lower than half prior to release. This year rate cuts are not expected.

Robert Both and Andrew Kelvin Strategist at Dominion Bank Toronto stated in a report to the investors that it must be imagined that this type of data shock makes way for further tightening. However, it is doubtful that BOC will possess adequate proof for moving rates in March, they added.

Immigration contributing to Canada’s growth

Immigration has resulted in the rapid growth of the population in Canada. The data from the survey reveals that non-permanent residents are witnessing outsized gains in jobs including overseas workers and provisional workers. The rate of participation of the labor force hiked 0.3% points to 65.7% as the labor force expanded by 153,000 jobs or 0.7%.

Canada is witnessing an unexpected increase in jobs similar to the US and both economies are defying forecasts for recession. Non-farm payrolls in the US increased by 517,000 in January and the rate of unemployment declined to 3.4%, the least after 1969. The hourly average wages increased at a steady pace.

The hourly average wages increased 4.5% in Canada in January a marginal decline from 4.8% for the month of December. This is after many months of constant growth at 5%.

Previously this week, Macklem said that growth in wages is progressing at 4%. Moreover, 5% is not consistent with bringing inflation again to the target of 2% except for astonishingly strong growth of productivity.

The splurge gains in January accelerated the rate of employment to 62.5%. It is the % of people in the age group 15 plus who are working. This level was earlier witnessed in May 2019. Growth of employment was propelled by men and women in their key working years.

The total hours of work increased by 0.8% in January on a monthly basis, the quickest speed after May. It was also a hike of 5.6% in compassion with the previous year. Five provinces witnessed an increase in employment inclusive of Ontario, Alberta, and Quebec.