By Robb M. Stewart
OTTAWA--Job gains in Canada were stronger than expected in December, pushing the jobless rate down slightly for a third month in four and back near the record low seen over the summer.
The increase in employment was again driven by full-time roles and coincided with continued wage growth, which is likely to fuel the debate over whether the central bank's tightening cycle is at an end after a string of increases in interest rates in 2022.
The number of employed working-aged people in Canada increased by 104,000 in December from November, while the unemployment rate ticked 0.1 percentage point lower to 5.0%, Statistics Canada reported Friday. Market expectations were for gain of 5,000 jobs and an unemployment rate of 5.2%, according to TD Securities.
When calculated using U.S. Labor Department methodology, Canada's unemployment rate in November was down 0.1 percentage point at 3.9%.
Following a string of interest-rate increases last year aimed at taming stubbornly high inflation, the Bank of Canada is watching economic data closely for signals the labor market is weakening, helping the economy shed some of its excess capacity.
With the addition of jobs in recent months, the employment rate in December is 130,000 above the level in May, the previous peak before job numbers started trending downward to August.
The unemployment rate is now running just above the record-low 4.9% reached in June and July, and year-over-year growth in average hourly wages remained above 5% for a seventh straight month in December. Economists expect inflation and the impact of higher interest rates will dampen household purchasing power and slow hiring demand this year, but they are divided as to whether the central bank would again raise its monetary policy rate later this month.
In its most recent monetary policy report, the Bank of Canada forecast economic growth would stall through the middle of this year as higher rates slow spending, reduce demand and help bring inflation back to its 2% target in 2024, from a reading of 6.8% in November. Its monetary policy rate was lifted 4 percentage points in all last year to 4.25%, the highest in almost 15 years.
With stronger-than-anticipated employment growth and unemployment down slightly in December, the labor-force participation rate--the proportion of the working-age population who were either employed or unemployed--picked up 0.2 percentage points from November to 65.0%.
Full-time employment rose by 84,500 in December from the previous month, while part-time jobs also increased, up by 19,500. The country's adjusted unemployment rate, which includes people who wanted a job but didn't look for one, slipped 0.2 percentage points to 6.8% in December.
Statistics Canada said monthly employment rose in the private sector and held steady sector in the public sector, with broad-based gains across several industries including construction, transportation and warehousing.
Total hours worked were little changed on a monthly basis and were up 1.4% from a year earlier.
The data agency said 8.1% of employees in December were absent due to illness or disability, up from 6.8% the month before and higher than the pre-pandemic average of 6.9% recorded in the month of December from 2017 to 2019.
Write to Robb M. Stewart robb.stewart@wsj.com
(END) Dow Jones Newswires
01-06-23 0853ET
