According to the latest figures from Statistics Canada, the unemployment rate rose to 6.8%, up 0.3 percentage points from October and 0.2 percentage points higher than expected.
Excluding the pandemic years of 2020 and 2021, this marks the highest unemployment rate Canada has seen in nearly eight years.
“If there is one indicator that will stress the Bank of Canada, this would be the one,” wrote BMO’s Chief Economist, Douglas Porter.
In response to the sharp rise in the unemployment rate, BMO has revised its Bank of Canada rate cut forecast to expect a 50-basis-point cut at the BoC’s December 11 meeting.
It’s a call shared by Oxford Economics. “With slack continuing to build in the labour market, GDP growing at a soft below-potential pace, and inflation at the 2% target, we expect the Bank of Canada will push ahead with another 50bp rate cut next week,” wrote economist Michael Davenport.
Bond markets are now pricing in 75% odds that the Bank of Canada will deliver a second consecutive “oversized” rate cut next week, bringing the policy rate down to 3.25%—its lowest level since September 2022.
This would also result in a prime rate of 5.45%, further lowering interest costs for variable-rate mortgage holders and those with personal or home equity lines of credit.
However, Porter cautioned that there’s still a case for a more moderate 25-basis-point cut.
“Domestic demand is clearly reviving, core inflation picked up last report, the Fed is proceeding more cautiously, and the currency is pushing 20-year lows,” he noted. “But the Bank seems biased to ease quickly, and the high jobless rate provides them with a ready invitation.”
Echoing this, Desjardins is maintaining its call for a 25-basis-point cut, arguing that the rise in the unemployment rate ‘masks the strength under the hood’ of the Canadian economy.
“With outsized hiring in the month, CPI inflation having advanced by 2% or less in the three months to October, and Q4 2024 real GDP growth tracking in line with the BoC’s expectations, we remain of the view that the Bank will cut by 25-basis points next week,” wrote Randall Bartlett Senior Director of Canadian Economics.
A dive into the November employment report
Although the economy added 50,000 net new jobs in November—54.2k full-time workers and a loss of 3.6k part-time positions—the growth fell short of keeping pace with the labour force participation rate.
StatCan reported that 138,000 people were actively seeking work, reflecting the rapid pace of population growth in the month. This marked the fastest pace of job seekers recorded outside of the pandemic years.
“Today’s jobs report had a lot of moving parts,” noted James Orlando of TD Economics. “Yes, the unemployment rate rose significantly, but this was due to a massive increase in the labour force rather than outright job losses.
The largest gains in employment were seen in wholesale/retail trade (+39,000), construction (+18,000), professional services (+17,000), education (+15,000), and accommodation/food services (+15,000). Declines were concentrated in manufacturing (-29,000), transportation/warehousing (-19,000), and natural resources (-6,300).
Regionally, job gains were highest in Alberta (+24,000), Quebec (+22,000) and Manitoba (+6,600), while remaining largely unchanged in the other provinces.
Other highlights from the November employment report:
- 2.5% of employed Canadians worked exclusively from home, while 11.5% had a hybrid arrangement.
- Youth unemployment rose 1.1 percentage points to 13.9%, partially reversing declines from September and October.
- Long-term unemployment increased, with 21.7% of the unemployed out of work for 27 weeks or more, up 5.9 percentage points from last year.
- Total hours worked were flat in November (-0.2%) but up 1.9% year-over-year.
- Average hourly wages grew by 4.1% year-over-year to $35.68.
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Last modified: December 7, 2024
