MNI: Canada Posts Second Month Of Surprising Job Gains

Canada's job market roared ahead for a second month in October with gains even in areas thought to be hit hardest by U.S. tariffs, suggesting the central bank will be more comfortable with its view interest rates are low enough to support the economy and keep inflation on target.

Employment climbed 66,600 following the September gain of 60,400, beating an MNI economist consensus for 10,000 new jobs. The unemployment rate also unexpectedly declined to 6.9% from 7.1%, pulling it back from the highest in a decade excluding the pandemic. 

Wholesale and retail trade led gains with an increase of about 41,000 while transportation and warehousing gained 30,000. Even manufacturers facing tariff rates as high as 50% saw employment rise by 8,700 in October, and jobs in that industry have even climbed 0.2% over the last year. 

Bank of Canada Governor Tiff Macklem told lawmakers Thursday the job market remains soft and the pain of tariffs is intense for industries targeted by President Donald Trump. Officials lowered the policy rate a quarter point to 2.25% on Oct. 29 and said if their forecast of weak growth and inflation holding around the 2% target next year holds up their reductions from a peak of 5% should be enough to guide the economy through the trade shock. Macklem before that decision also downplayed the previous strong job gain saying on balance payrolls had still contracted over the three previous months, suggesting he can now be more confident that worst-case scenarios are fading. 

Trade risks will hang over Canada through next year with Prime Minister Mark Carney waiting for Trump to return to talks he abandoned a few weeks ago. U.S. officials also want a larger review of the North American free trade pact next year. Total employment growth in 2025 remains the slowest since 2015, a year when plunging oil prices hurt Canada's resource-based economy. 

Hours worked, which economists view as a proxy for GDP, declined 0.2% in October as a result of labor disputes. From a year earlier hours worked rose 0.7%, consistent with the Bank's view growth will be around that pace in the second half of this year. Average hourly wages picked up a bit to 3.5% from a year earlier from the prior 3.3%. 

Assessing balance in the job market is clouded by the government's move to curb record immigration that pushed labor supply ahead of demand. On Tuesday the government again provided lower immigration targets, which could nearly stall population growth in coming years. Employment will also falter in the public sector with Carney's budget seeing a 10% federal workforce reduction.