Morning Market Brief: November 7, 2023

Canadian labour market losing steam

Data from October, released on Friday, showed that Canada’s labour market may be losing momentum as we approach 2024. Canada’s labour market has been a source of strength for Canada’s economy and Canadian households. This has helped keep spending relatively robust, but there are signs it may be easing, which is weighing on Canada’s gross domestic product.?

• Canada’s economy added 17,500 jobs in October, which was below the 25,000 additional jobs economists had been expecting, based on a survey by Bloomberg. Besides a few months of job losses, this was the lowest number of job additions in a month since 2022.
• Full-time employment declined by 3,300 over the month, offset by a 20,800 rise in jobs in the part-time sector. October’s decline in full-time jobs was the first since May 2023.
• Canada’s unemployment rose to 5.7% in October from 5.5% in September. October’s rate was the highest since January 2022. The jobless rate has edged higher over the second half of 2023.
• The growth in wages also eased in October compared to September. October’s labour market results added to expectations the Bank of Canada might hold its key interest rate steady at 5.00% at its final meeting of 2023, on December 6.
• Labour market results were much the same in the US. The economy added fewer jobs in October than in September, and the U.S. unemployment rate ticked higher to 3.9%. Could the pullback in the US labour market, in addition to slowing inflation, cause the US Federal Reserve Board to hold its policy interest rate steady at its next meeting?

The labour market, which was a beacon of strength for Canada’s economy coming out of the early stages of the pandemic, appears to be stalling. That could add pressure to Canadian households. In recent months, however, this negative news sometimes had a positive effect on financial markets. For example, last Friday, by raising expectations central banks might hold steady over the remainder of 2023, equity markets surged higher.

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