Another rise, maybe two
The high inflation rate and the seven successive interest rate hikes have not yet had an impact on the job market, which ended 2022 on a strong note. Nine of the ten Canadian provinces report an increase in the number of jobs, especially full-time jobs, and in the private sector. For the Bank of Canada, which is counting on a cooling labor market to calm inflation, this means that its work is not finished.
Given the strength of the job market, an increase in the key rate of at least 25 basis points, and perhaps even 50 basis points, is possible on January 25, suggests Sébastien Lavoie, chief economist of Laurentian Bank. Another possibility, he said, is a 25 basis point hike in January, followed by another in March.
Wages rising faster in Quebec
Another subject of concern for the Bank of Canada, the average hourly wage continues to increase at a sustained pace and fuel inflation. In December, growth in the average hourly wage exceeded 5% for a seventh consecutive month.
In Quebec, the average hourly wage increased even more, a consequence of the even tighter labor market than elsewhere in Canada.
The average hourly wage in Quebec increased by 6.9% between December 2021 and December 2022, according to the Institut du Québec, which is higher than the inflation rate which stood at 6.8% in November.
Sherbrooke leads the way
The unemployment rate rose slightly in Quebec in December, going from 3.8% to 4%, while it fell from 5.5% to 5.3% in Ontario.
In Quebec, Sherbrooke has the lowest unemployment rate, at 2.95%. This is one of the lowest rates in the country, behind Lethbridge, Alberta (2.7%). The unemployment rate rose slightly in Metropolitan Montreal in December, while it fell in Toronto and Vancouver.
At 4.4%, the unemployment rate in the Montreal metropolitan area is the same as in Vancouver, but remains lower than that of Toronto (5.7%).
The Montreal region has had 80,100 more jobs over the past year, while the rest of Quebec has lost 1,500, notes Stéphane Marion, economist and chief strategist at the National Bank. “The excellent job creation in the greater Montreal area in 2022 has helped limit the decline in house prices,” he analyzes in his report for the year.
Some signs of weakness
On closer inspection, the picture of the labor market in December suggests some signs of weakness. “While employment continues to grow, the number of hours worked has essentially stalled since the first quarter,” said economists Matthieu Arseneau and Alexandra Ducharme of the National Bank.
PHOTO MARTIN CHAMBERLAND, ARCHIVES LA PRESSE
The unemployment rate rose slightly in Quebec in December, going from 3.8% to 4%, while it fell from 5.5% to 5.3% in Ontario.
The two economists also note the results of a survey by the Canadian Federation of Independent Business, which indicate that despite the labor shortage, SMEs are reducing their hiring intentions. “We continue to believe that the job market will moderate in the coming months,” they reiterate.
This is also the opinion of Sébastien Lavoie, of the Laurentian Bank, who believes that the unemployment rate will increase beyond 6% in the second quarter. The high number of vacancies should facilitate the transition of the newly unemployed to other sectors of activity, he underlines.
Same fight in the United States
The job market was also surprisingly strong in the United States. The US economy added 223,000 jobs in December, and the unemployment rate fell from 3.6% to 3.5%.
This is a 53-year low in the unemployment rate in the United States, according to the US Department of Labor. However, the pace of job creation is slowing and average earnings are rising less rapidly, which gave stock markets a boost on Friday, which sees an opportunity to hope for an end to interest rate hikes soon.
That’s not enough to knock the Federal Reserve off course, says Bank of Montreal economist Sal Guatieri. Compensation growth may be slowing, but it is still far from consistent with the price stability that the US central bank is aiming for, he said. “Another 50 basis point hike is likely in February,” he predicts.