Canada’s labour market is showing signs of persistent fatigue, with new data revealing a third month of job losses. Statistics Canada reported on Friday that the national unemployment rate climbed to 6.7 per cent in October, an increase of two-tenths of a percentage point from the previous month.
The economy shed 4,700 positions in October, a development that follows a cumulative loss of 110,000 jobs throughout August and September. This latest contraction comes as a surprise to many observers, particularly after a Reuters poll of economists had projected a recovery, with expectations for a gain of 13,600 jobs for the month.
Private Sector Employment Declines as Public Sector Adds Roles
The latest figures highlight a stark divergence between the public and private sectors. Private sector employment declined by 53,000 positions in October, marking the first such drop since February. Conversely, the public sector added 50,000 roles, though Statistics Canada noted that on a year-over-year basis, private sector employment remains higher while public sector figures have trended downward.
Industry-specific data shows that wholesale and retail trade led the losses, shedding 29,000 roles in October. This sector has faced downward pressure over the past year. Further losses were recorded in transportation, warehousing, and the food and accommodation industries, though these were partially mitigated by gains in construction and education.
CIBC senior economist Andrew Grantham noted that while he had anticipated some volatility due to factors like the Alberta referendum, the current data points to a deeper, more systemic softness. “It does look as if we’re seeing some weakness in the labour market outside of those trade-sensitive areas,” Grantham said. “So that’s a concern for us right now.”
Impact on Youth and Future Projections
The youth labour market faced significant pressure in October, with the unemployment rate for workers aged 15 to 24 rising to 13.7 per cent—a 0.7 percentage point increase from September. Statistics Canada reported that this cohort saw a decline in overall employment, coupled with a higher number of young people actively seeking work. The rate was notably higher for students compared to those not currently enrolled in school.
Sneha Puri, an economist with the job search site Indeed, described the October report as a disappointment for those expecting a rebound. “If this optimism isn’t then translated into a strong jobs report in the months ahead, the surprising weakness in headline employment will start to look less temporary and more like the beginning of a renewed cooling in the labour market,” Puri warned. She added that clarity on U.S. trade policy following the midterm elections could be a determining factor in whether employers regain the confidence to resume hiring.
Monetary Policy and Bank of Canada Outlook
The October employment data arrives just over a week after the Bank of Canada implemented its first interest rate hike in more than three years, raising the policy rate by a quarter-point to 2.5 per cent. The latest Statistics Canada figures suggest that significant slack remains in the job market, a finding that some economists believe should caution the central bank against further aggressive tightening.
Thomas Ryan, a senior North America economist at Capital Economics, noted that the combination of rising unemployment and muted wage growth provides a clear signal to policymakers. “Ultimately, this adds to our conviction that the bank will hike rates no more than twice more as a precaution against upside inflation risks, before calling it a day,” Ryan wrote in a note to clients.
As of Friday afternoon, financial market participants estimated a 35 per cent probability of a quarter-point rate hike at the Bank of Canada’s final decision of the year, scheduled for December 9. While central bank officials have emphasized the need to combat inflationary pressures, Grantham suggested that the combination of soft labour data and recent declines in global oil prices may take some of the pressure off the bank to raise rates again next month.
