The Canadian labour market shed 2.2k positions in March, with full-time employment down -0.7k and part-time employment down -1.6k.
The unemployment rate rose 0.3 percentage points to 6.1%, the highest level in more than two years, and the participation rate was unchanged at 65.3%.
Employment by sector showed losses in accommodation and food services (-27k), wholesale and retail trade (-23k) and professional, scientific and technical services (-20k). A positive offset was seen in health care and social assistance (+40k).
Lastly, total hours worked fell 0.3% month-on-month, while wages were up 5.1% year-on-year (from 5.0% in February).
Key Implications
The Canadian labour market lost steam in March, with the unemployment rate rising significantly. This continues the trend over the last year, where Canadian firms have been unable to absorb strong population-driven labour force growth. While this has brought the labour market into balance, it also means that more Canadian workers are unemployed (280k more since the beginning of 2023). To make matters worse, hours worked fell for the first time in four months. This throws some cold water on expectations that the recent string of hot economic data prints to start 2024 will be sustained.
Today’s report casts a cloud over the Canadian economy, but it is unlikely to change the Bank of Canada’s (BoC’s) thinking when it meets next week. As mentioned above, recent data outside of this weak employment report has been quite strong. This validated the Bank’s decision to remain patient with the start of rate cuts. While it has afforded the central bank some extra time to wait to ensure inflation remains on its downward trajectory 2%, markets are increasingly betting that the BoC will pull the trigger on its first rate cut in June.
