OTTAWA — Canada’s unemployment rate has edged back down to its four-decade low of 5.8 per cent — but even in a job market that’s having a hard time finding workers, wage growth is continuing to slow.
The country added 11,200 net new jobs in October, including a gain of 33,900 full-time positions, Statistics Canada said Friday in its latest labour force survey.
The agency said the jobless rate moved down from its 5.9 per cent reading in September, in large part because fewer people searched for work.
One fresh data point, in particular, is likely to catch the Bank of Canada’s attention: wage growth.
The indicator is watched by the central bank ahead of its interest-rate decisions and, despite the tightened labour market, pay growth slowed for its fifth-straight month. Solid wage growth can apply upward pressure on inflation, which can then feed into the Bank of Canada’s decisions on interest rates.
Year-over-year, average hourly wage growth slowed last month to 2.19 per cent for its weakest reading since September 2017. Experts have predicted wage growth to rise along with the tightened labour market, but average hourly wage growth has dropped every month since May when it was 3.94 per cent.
When it comes to permanent employees, wage growth last month rang in at just 1.9 per cent — which TD senior economist Brian DePratto noted is below inflation.
“The wage rate definitely stands out here,” said DePratto, who believes the number will make it a little bit less likely the Bank of Canada will introduce another interest rate hike in December.
DePratto expects the central bank to wait until January before its next rate increase.
“It’s concerning, for sure, and it’s difficult to disentangle, but we’re not going to get too, too hung up just yet,” he said.
Other analysts also pointed to soft wage growth in the report Friday as a possible reason for the Bank of Canada to hold off in December.
“The deceleration in wage growth is the most important downward risk for the Bank of Canada to continue hiking,” Bank of America Merrill Lynch economist Carlos Capistran wrote in a research note to clients.
Josh Nye, senior economist for RBC, wrote in a note: “We think wage growth will be key to whether they speed up the pace of rate increases.”
Last week, the Bank of Canada hiked its trend-setting rate for the fifth time since the summer of 2017. Governor Stephen Poloz also signalled future hikes could be sooner than previously expected.
This week, Poloz told lawmakers in Ottawa that Canadians need to get used to the idea of three per cent interest rates as the new normal, now that the era of rock-bottom borrowing costs is gradually fading away.
The central bank estimates its key interest rate will need to gradually rise to between 2.5 per cent and 3.5 per cent to keep inflation from climbing too high. The rate is now 1.75 per cent.
The open question is how quickly the rate will rise.
Statistics Canada’s labour report Friday also showed that compared with 12 months earlier, national employment was up 1.1 per cent following the addition of 205,900 positions, including 173,000 full-time jobs.
For employee work, the public sector lost 30,800 jobs last month, while the private sector added 20,300 positions. Of the new jobs, 21,800 came in the less desirable category of self employment, which is a classification that includes people working in a family business without pay.
By region, Saskatchewan added 2,500 jobs in October, but employment levels were largely unchanged in the other provinces.
Looking at industries, the goods-producing sector lost 12,000 jobs last month in a decline led by a notable loss of 7,100 positions in natural resources work. The services sector added 23,200 jobs in October following a gain of 22,000 positions in business, building and other support services.
Last month, survey results released by the Bank of Canada said companies, on balance, have reported that labour shortages have intensified over the past 12 months.
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Andy Blatchford, The Canadian Press