OTTAWA — Employment growth in Canada blew past economists' predictions in January, even as forecasters had expected higher interest rates to weigh on the labour market.
The economy added a whopping 153,000 jobs last month, Statistics Canada said in its latest labour force survey released Friday.
The country's unemployment held steady at five per cent, hovering just above the record low of 4.9 per cent reached in the summer.
The Canadian economy has been on an upward trend with employment since September, adding a total of 326,000 jobs.
That’s despite forecasters anticipating the higher cost of borrowing will slow the economy down significantly this year and weigh on employment.
In January, Statistics Canada said gains were made across sectors in the economy. Wholesale and retail trade experienced the largest gains to employment, adding 59,000 jobs, followed by 40,000 jobs added in health care and social assistance.
Most jobs added to the economy were full-time, while people aged 25 to 54 drove the gains.
With the labour market running hot, wages have also been rising, though at a slower pace than inflation. In January, wages were up 4.5 per cent on a year-over-year basis, growing at a slightly slower pace than in December.
The slower wage growth partly reflects relatively high average wages in January 2022 as COVID-19 restrictions caused job losses in lower-paying sectors.
Revisions to labour force survey data suggest wage growth peaked at 5.8 per cent in November.
Since March, the Bank of Canada has raised its key interest rate eight consecutive times, bringing it to 4.5 per cent. That’s the highest it’s been since 2007.
Typically, higher interest rates cause businesses and people to pull back on spending. As spending slows and sales fall, businesses may alter hiring plans.
While economists generally note employment is the last indicator to turn during an economic slowdown, the labour market has been surpassing most economists’ expectations.
Ahead of the release of the labour force survey on Friday, RBC forecast the Canadian economy added 5,000 jobs last month.
The Bank of Canada said the tight labour market is a sign of an overheated economy.
At its Jan. 25 decision, the central bank indicated that it plans to hold its key rate, allowing time for higher interest rates to work their way through the economy.
The central bank is hoping to see easing in the labour market, something it says is necessary for inflation to come down to its target of two per cent.
This report by The Canadian Press was first published Feb. 10, 2023.
The Canadian Press
