Canada Employment Preview: Forecasts from five major banks, jobless rate ticking higher

We look for another month of below-trend job growth with +15K in November as the UE rate drifts 0.1pp higher to 5.8%. Hiring conditions have deteriorated over the second half of 2023, while the gradual shift towards more balanced labour markets should also take some pressure off wage growth. We look for AHE to slow to 4.8% YoY (+0.2% MoM) as hours worked post a modest increase.

We expect November’s Canadian labour market data will underscore broader weakness in the economy. We look for a 15K job gain – not enough to prevent the unemployment rate from ticking higher by one-tenth to 5.8%. Soaring population growth has boosted the available labour supply, but as hiring demand slows, labour is being absorbed more slowly by the job market. Wage growth will be watched closely by the Bank of Canada, but softening labour demand is shifting bargaining power back to employers and we look for wage growth to broadly slow going forward.

Job creation may have slowed to 10K in November, reflecting a loss of momentum in the Canadian economy. This modest gain, combined with another significant expansion of the labour force and an unchanged participation rate (65.6%), should translate into a two-tenth increase in the unemployment rate, to 5.9%.

In addition to softer activity data over Q2 and Q3, a recent rise in the unemployment rate has been a clear sign of the rebalancing of demand and supply that has been an encouraging development for the BoC. This trend could continue in November, with employment likely to be unchanged which would imply another rise in the unemployment rate to 5.9%. Wages, in addition to the path of core inflation, will be an important metric in assessing the timing of possible rate cuts.

The labour market likely continued to soften in November, in line with the deterioration in economic activity and labour demand. Our forecast for 10K jobs to have been created would leave the unemployment rate a tick higher at 5.8%, in the context of still-strong population growth. The continued easing in the labour market will work to quell wage pressures ahead, setting the stage for BoC cuts in Q2 next year.