Surprise surge in private sector work fuels Canada’s gain of 66,800 new jobs

OTTAWA—The country saw a surprise rush of 66,800 net new jobs in January in a gain fuelled by a hiring surge in the private sector, Statistics Canada said Friday.

The agency’s latest labour force survey said more people also searched for work last month, which pushed the unemployment rate to 5.8 per cent, up from its 43-year low 5.6 per cent in December.

The biggest boost came from the number of private-sector employee positions, which climbed by 111,500 in January for the category’s biggest month-to-month increase since the agency started collecting the data point in 1976. The number of self-employed positions, which can include unpaid work, declined by 60,700.

The services sector saw a gain of 99,200 positions, led by new work in wholesale and retail trade, while the goods-producing industries experienced a net loss of 32,300 jobs, the report said.

“Definitely the headline job gain was very impressive,” said BMO chief economist Douglas Porter. “And even going into some of the details there was an incredible show of strength, supposedly, from the private sector. We actually saw a record gain in private-sector payrolls.”

But Porter was also cautious. He added that he used the word “supposedly” because monthly job numbers tend to bounce around a little bit.

It’s better, he said, to look at the three-month and six-month trends, although he also described those results as solid in recent months.

He said it’s also important to consider that growth in Canada’s population and labour force has accelerated, thanks in large part to immigration. Due to this, the country almost needs big monthly job numbers just to keep the unemployment rate steady, Porter added.

Sherry Cooper, chief economist for Dominion Lending Centres, wrote in a research note to clients Friday called the increase in the number of people looking for work a sign of strength, even though it has nudged up the unemployment rate.

“This suggests there is more capacity in the economy before inflation pressures begin to mount—a big point for the Bank of Canada,” Cooper wrote.

Overall, a consensus of economists had expected the addition of 8,000 jobs for the month and a jobless rate of 5.7 per cent, according to Thomson Reuters Eikon.

Year-over-year average hourly wage growth in January for permanent employees was 1.8 per cent, which was up from December’s reading of 1.5 per cent, but still well below its May peak of 3.9 per cent.

Even with the improvement, the January number remained just under the inflation level, which suggests Canadians’ salaries could have a tough time keeping up with rising prices for consumer goods.

The Bank of Canada has been monitoring wage growth ahead of its interest-rate decisions as it tries to determine how well indebted households can absorb higher borrowing costs. The central bank does focus on a reading called “wage common,” which incorporates payroll data from several sources, not just from the labour force survey.

Last week, Bank of Canada senior deputy governor Carolyn Wilkins said the country has been in a “puzzling” stretch of weak wage growth at a time when the job market has been experiencing one of its biggest labour shortages in years.

She said the struggles of energy-producing provinces, which began with the late-2014 oil slump, have been a big factor that has dragged down national wage-growth numbers. The Bank of Canada has expressed confidence that wage growth will pick up its pace.

Economists said Friday’s strong report was unlikely to change the Bank of Canada’s thinking when it comes to the timing of its next rate hike. Many analysts expect governor Stephen Poloz to wait until much later in 2019 before making a move.

Friday’s Statistics Canada numbers also showed that employees worked 1.2 per cent more hours, year-over-year, compared to the 0.9 per cent reading in December.

Canada added 30,900 full-time jobs last month and 36,000 part-time positions, the report also said.

More young Canadians, between the ages of 15 and 24 years old, found work last month as youth employment gained 52,800 positions. The youth jobless rate edged up to 11.2 per cent, from 11.1 per cent in December as more young people looked for work.

By region, Ontario and Quebec had the biggest employment increases last month. Energy-rich Alberta, hit hard by the oil-price decline, shed jobs for a second-straight month and saw its jobless rate rise to 6.8 per cent, up from 6.4 per cent.