Canada’s hot employment market turned up a few degrees last month. Statistics Canada (Stat Can) released its Labour Force Survey showing April’s employment climbed. It was a relatively small increase, but enough to drive the unemployment rate to a new record low. Toronto and Vancouver are bucking the trend, though, both showing climbing unemployment rates.
Canada’s Unemployment Rate Fell To 5.2%, A New Record
Canadian employment was “flat” according to Stat Can, but did show a small improvement. The employed population climbed 0.1% (+15,300) in April. It might have been small, but was enough to push the unemployment rate down to 5.2%, 0.1 points lower than a month before. That makes it a new record low for unemployment of those willing, able, and looking for work.
Canadian Unemployment Rate
The seasonally adjusted rate of unemployment across Canada.
Source: Statistics Canada; Better Dwelling.
Looking for work is a point worth emphasizing. The adjusted unemployment rate includes those who want a job, didn’t look for one, and had no reason not to look. Adjusted unemployment fell to 7.2% in April, a full 2 points higher than the headline rate. This is back to pre-2020 numbers, but not a record low.
Core working adults are those in peak earning years (25 to 54 years old), and also a critical data point. The unemployment rate for this group fell to 4.3% in April, down 0.2 points from a month before. It also hit a new record low, so the market is very healthy except for the number of people who want to work but didn’t look.
Despite A Tight Labor Market, Wages Aren’t Moving Much
Canadian employers might be hitting a wall with wages failing to move much. The average hourly wage rose to $31.06 in April, up 3.3% (+$0.99) from the month before. Annual growth was 3.4% in March, so there’s a slight deceleration. Wage growth is slowing with tight unemployment and climbing inflation. If wages rise 3.3%, but inflation is 6.7%, workers will see their buying power contract 3.4% from last year.
Douglas Porter, BMO’s chief economist, explains this reinforces the need for the Bank of Canada (BoC) to raise rates. “The one item of news here that may help contain just how much the Bank [of Canada] ultimately needs to hike is the ongoing calmness of wages,” he explained.
If unemployment is at a record low and wages aren’t moving, but inflation soars, excess demand is an issue. The ability to produce more doesn’t exist.
Toronto and Vancouver Are Seeing Unemployment Climb Again
Toronto and Vancouver usually lead the employment trend but now they’re bucking it. Toronto’s seasonally adjusted unemployment rate rose to 6.4% in April, up 0.2 points from the month before. Vancouver made a similar 0.2 point climb to 5.6% over the same period. Both cities have higher unemployment rates than the national average. This wasn’t the case in February 2020 or the months before.
Canadian Unemployment Rate
The seasonally adjusted rate of unemployment across Canada, compared to Toronto and Vancouver CMAs.
Source: Statistics Canada; Better Dwelling.
It’s too soon to tell what’s behind the trend, but work from home (WFH) likely plays a big part. The share of Toronto WFH employees reached 35.1% in April, compared to 26.1% across Canada. This indicates significantly more Toronto employers are comfortable with WFH arrangements.
People used to move to cities to find employment but it isn’t quite that easy right now. Low skilled jobs don’t pay the rent in these pricey regions any more. More WFH higher skilled jobs mean competing with a national pool of labor. It’s worth keeping an eye on whether this is a blip, a leading national trend, or a paradigm employment shift.
Despite the bump of unemployment in two major cities, the labor market is strong. Tepid wages and record low unemployment are problematic, especially with such high inflation. On the upside, the BoC has even more reason to raise interest rates now.
