Stronger-Than-Expected Jobs Report in December

Today’s Labour Force Survey for December was much stronger than expected, as many thought the Canada Post strike would have a larger impact. Employment rose by 90,900 net new jobs last month, and the employment rate—the proportion of the population aged 15 and older who are employed—increased by 0.2 percentage points to 60.8%. The jobless rate declined a tick to 6.7%.

Industry-Specific Employment Gains

Employment gains in December were led by:

  • Educational services (+17,000; +1.1%)
  • Transportation and warehousing (+17,000; +1.6%)
  • Finance, insurance, real estate, rental and leasing (+16,000; +1.1%)
  • Health care and social assistance (+16,000; +0.5%)

Regional Employment Changes

Employment increased in several provinces:

  • Alberta (+35,000; +1.4%)
  • Ontario (+23,000; +0.3%)
  • British Columbia (+14,000; +0.5%)
  • Nova Scotia (+7,400; +1.4%)
  • Saskatchewan (+4,000; +0.7%)

Meanwhile, there was a decline in Manitoba (-7,200; -1.0%), and employment changed little in the other provinces.

Hours Worked and Wage Growth

Total hours worked rose 0.5% in December and were up 2.1% compared with 12 months earlier.

Average hourly wages among employees increased by 3.8% (+$1.32 to $35.77) on a year-over-year basis in December, following growth of 4.1% in November (not seasonally adjusted).

Employment Trends and Year-End Review

Employment rose by 91,000 (+0.4%) in December, mostly in full-time work (+56,000; +0.3%). This marks the third employment gain in the past four months.

The year 2024 ended with 413,000 (+2.0%) more people working compared with 12 months earlier. This year-over-year growth rate was comparable to December 2023 (+2.1%) and the pre-COVID-19 average for December (2017-2019) of +1.9%.

Public and Private Sector Employment

Public sector employment rose by 40,000 (+0.9%) in December, marking the second consecutive monthly increase. In the 12 months to December, public sector employment rose by 156,000 (+3.7%).

Private sector employment was little changed in December (+27,000; +0.2%) and increased by 191,000 (+1.4%) year-over-year. The number of self-employed people rose by 24,000 (+0.9%) in December, the first increase since February, bringing total gains in self-employment for the year to 64,000 (+2.4%).

Monetary Policy Implications

Wage inflation slowed markedly in November and December, providing welcome news for the Bank of Canada. While the strength of this report has led some to speculate the central bank will ease less aggressively, jumbo rate cuts are unlikely. Monetary policy remains overly restrictive, especially if the Trump tariff threats materialize.

We expect the BoC to reduce the overnight rate from 3.25% to 2.5% by mid-year in quarter-point increments.

Bottom Line

The Canadian Labour Force Survey is notoriously volatile. One robust report does not change the Bank of Canada's easing plans to return interest rates to neutrality—the level at which monetary policy is neither contractionary nor expansionary.

Today's US employment report was also strong, reducing the unemployment rate to 4.1%. While the Fed is unlikely to cut rates at its next meeting, the Bank of Canada has room to ease further. Canada's economy is more interest-sensitive than the US, and Canadian interest rates, though historically low, remain overly restrictive.


Source - Dr Sherry Cooper - DLC

Posted by Adam Chahl on
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