North American Jobs Trends Continue Strong

Jobs in Canada rose by 41,400 in April, an acceleration from the approximately 35,000 gain made back in March. This compares to a gain of 21,800 in February and it shows acceleration in overall employment growth on that timeline. On a broader timeline that looks at average gains over 12 months, versus six-months and versus three months, we find gains accelerate over 6-months compared to 12-months, then decelerate over three-months compared to 6-months.

Looking at month-to-month changes, job growth across sectors, and major groupings, accelerates from February to March and from March to April. And although job growth overall does not accelerate on a broader timeline, job diffusion shows that the breadth of accelerations improved from 12-months to 6-months, to 3-months. That means it accelerated in an increasing proportion of categories.

Canada, much like the U.S., with an inflation problem, and a central bank that is hiking rates, has a resilient labor market.

The Canadian unemployment rate at 5% in April is unchanged for five months in a row and that unemployment rate is tied for the seventh lowest unemployment rate on data back to 1990. Canada’s unemployment rate hit is low on this timeline of 4.9% in June and July of 2022. On this timeline, the Canadian unemployment rate has been this low or lower only 1.5% of the time.

Jobs in Canada accelerate steadily only in the transportation sector looking at changes over 12-months to six-months to three-months. However, there are slowing job gains sequentially for the goods sector, in construction, and for professional and technical workers.

While job market aggregates in Canada remain strong, there clearly is also some evidence of softening as we certainly would expect given the inflation overshoot and the actions by the Bank of Canada to try to rein inflation back in.

Canada's labor force participation rate at 65.6% in April is unchanged from March and only slightly lower than it was in February 2023. The overall rate continues to cruise slightly below its pre-COVID pace when the participation rate was as high as 66.1%.

On balance, we see many of the same features in Canada's labor markets that we see in the U.S. labor market. This is not surprising because the U.S. and Canadian economies share a long, unprotected border, and there's a great deal of trade that occurs between the two countries. It's not surprising that the two economies act as they're joined at the hip, even though one has a much bigger hip than the other. The economic challenges of controlling inflation and dealing with job market repercussions still lie ahead as central banks in North America have only just begun to get their official rates up to the level of the trailing 12-month inflation rate. Now we are about to see how truly resilient labor markets are when real interest rates turn positive and climb above the rate of inflation. Monetary policies in North America are on the verge of becoming restrictive for the first time in this cycle.