The jobless rate was stronger than expected in the latest employment data from Statistics Canada, but that headline result is masking a still-weakening labour market that is crying out for more rate relief, National Bank Financial Inc. (NBF) economists say.
In a new report, the bank’s economists delve into the details of last week’s jobs report, which noted that hiring was weaker than expected in October, but the unemployment rate held up better than expected.
“It’s a head scratching result at first glance but, as has been the case of late, this can be traced to participation,” NBF said, noting that growth in the pool of available workers is lagging the population.
The participation rate decline is “most acute among Canadian youth, a surging international student population a major contributing factor,” the report noted, but labour force participation is declining among older cohorts of workers too.
“There’s likely a ‘discouraged worker’ effect at play, which is not the sign of a healthy labour market,” the report said.
The economists estimated that if the participation rate was unchanged in October, the jobless rate could’ve risen to 6.7%. If participation immediately returned to 2023 levels, they said the unemployment rate could be as high as 7.7%.
Ultimately, the report concluded that the labour market is soft, and with labour demand remaining depressed, “it’s unlikely we’ll see the above-potential hiring (or GDP growth) that the [Bank of Canada] is seeking.” As a result, it suggested that another 50-basis point rate cut by the central bank remains a likely prospect in December.