Canada’s labor market stopped even as unemployment fell to a new record low, hampered by a shortage of new workers.
The economy added 15,300 jobs in April, Statistics Canada said in Ottawa on Friday, less than half of the 40,000 expected by economists. The small increase put an end to the surge in which Canada created about 410,000 jobs in the previous two months.
Unemployment fell to 5.2% in April – the lowest since 1976 – as the economy failed to drive new labor growth.
As employment is well above pre-pandemic levels, economists and politicians expect job creation to slow as the nation struggles to find new workers amid increased demand from employers. The imbalance between supply and demand for jobs is a major reason for the Bank of Canada to tighten monetary policy. The Canadian economy has added almost 1 million jobs in the last year, with employment nearly half a million above February 2020 levels.
“This is an indication that we are reaching a fairly mature stage in the economic cycle,” Josh Nye, a senior economist at the Royal Bank of Canada, told BNN Bloomberg. “It’s just going to be hard to generate job profits on the scale we’re used to over the last year or so.”
Yields on benchmark two-year Canadian bonds fell about 4 basis points after the figures were released to 2.682% at 8:42 a.m.
Concerns that Canada’s economy is running out of capacity are fueling expectations of the Bank of Canada’s aggressively raising interest rates in the coming months, including a half-point increase in its policy decision next month. The central bank raised its interest rate by 0.75 percentage points from early March to 1 percent, and overnight swap trading is expected to rise another 2 percentage points by the end of this year.
Canada’s labor force participation rate fell to 65.3% in April. In addition to the evidence of market tightening, involuntary part-time employment reached 15.7 percent, a record low.
The data also shows the extent to which the economy has been hampered by an increase in coronavirus cases last month, as the omicron variant has spread across the nation. Hours of work fell 1.9 percent in April, in part due to a jump in COVID-related absences, Canadian Statistics reported.
The average hourly wage rose 3.3% from a year earlier, down from 3.4% in February. The salaries of permanent employees have increased by 3.4 percent. The nation lost 31,600 full-time jobs in April, more than offset by a 47,100 increase in part-time employment.
Construction has declined, with employment in the sector declining by 20,700 jobs. The service industries reported a profit of 31,400 for the month.
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