Is Canada's labour market working?

Another month, another weak Canadian jobs report.

Statistics Canada has reported that, nationally, employment was virtually unchanged in August (+22,000 jobs, for a marginal gain of 0.1%), while the unemployment rate jumped to 6.6% from 6.4% in July. This marked the highest rate of unemployment in Canada in almost three years (back in September 2021 it was 7.0%, but falling).

The country’s employment rate—the proportion of the adult population that is working—fell only marginally between July and August, dipping to 60.8% from 60.9%. While a diminution of this magnitude isn’t, on its own, something to lose sleep over, the fact that August’s employment rate was the lowest (excluding pandemic-related adjustments) since October 1999 is. And yes, you read that correctly: Canada’s employment rate is currently (effectively) the lowest it’s been this millennium.

At the same time, the labour force participation (LFP) rate—the proportion of the adult population either working or actively looking for work—rose a wee bit, to 65.1% from 65.0% a month earlier, which is a positive development when considered in isolation. When considered more broadly, Canada’s LFP is at its second-lowest point since June 1998.

So overall, the news coming out of the recently-released data on Canada’s labour market isn’t great, to put it mildly. Even the 22,000 net job additions were driven by part-time work—which added 66,000 jobs—with full-time positions dropping by 44,000, month-over-month.

The evidence is clear that the Canadian economy is operating within a still-too-tight vice grip of high interest rates, and based on this latest lackluster jobs report, we should all expect more rate cuts by the Bank of Canada to close out this year.