Canadian economy added 22,000 jobs last month, unemployment held steady
Unemployment is expected to rise in the coming months as high interest rates take the steam out of spending
Employment in Canada rose slightly last month after January’s jobs report raised eyebrows among economists anticipating a slowdown in the labour market this year.
In its labour force survey Friday, Statistics Canada said the economy added 22,000 jobs in February, with employment up in the private sector.
The federal agency said the country’s unemployment rate held steady at five per cent, hovering near record-lows.
The bulk of the job gains were made in health care and social assistance, public administration and utilities. Meanwhile, jobs were lost in business, building and other support services.
In January, the economy added 150,000 jobs, beating out forecasts significantly.
Though conditions in the labour market remain quite good – with unemployment just above the all-time low of 4.9 per cent – Statistics Canada’s latest report showed a return to more modest employment growth.
Unemployment is expected to rise in the coming months as high interest rates take the steam out of spending, slowing the economy.
Signs of that slowdown are already apparent. In the fourth quarter, the Canadian economy was treading water, posting zero per cent growth.
With affordability top-of-mind for many Canadians, the latest jobs report shows the gap between wage growth and inflation is narrowing. Average hourly wages were up 5.4 per cent in February compared with a year ago while annual inflation rate was 5.9 per cent in January.
The Bank of Canada, which is working to bring down the country’s high inflation rate, has raised concerns that sustained four to five per cent wage growth will make it harder to return to its two per cent inflation target.
But the central bank says it expects the labour market to ease in the coming months, as higher interest rates slow spending by people and businesses.
At its latest interest rate announcement, the Bank of Canada held its key rate steady at 4.5 per cent, the highest it’s been since 2007.
Though high interest rates have already taken a toll, the full effect is still ahead, as economists estimate it can take up to two years for rate hikes to be digested by the economy.
Banner image: THE CANADIAN PRESS/Graeme Roy
This report by The Canadian Press was first published March 10, 2023.