Canada’s unemployment rate is forecasted to increase to 7.2% for the month of September, a slight increase from 7.1% in August. This anticipated increase comes as the country prepares for the release of its Employment Labour Force Survey, scheduled for Friday at 12:30 GMT. Analysts are closely monitoring these figures, as they significantly influence the Canadian dollar and provide insights into the overall health of the labor market.
This is what the labor market statistics mean, beyond the unemployment rate. They include the all-important Employment Change figure, which analysts mostly take as the most important barometer for economic health. In August, the Employment Change suffered the largest plunge since April 2020 of 65,500 people, making folks worried about job growth. September’s consensus is for a soft rebound, with increases projected at only 5,000 new workers.
Unemployment Rate Trends
Beyond the anticipated increase in Canada’s unemployment rate. These changes come at a time where economic circumstances are drastically changing. August’s 7.1% rate was troubling in and of itself, mainly due to the impact of that big drop in the employment number. This shift in the employment numbers has given rise to debate about what this means for future monetary policy from the Bank of Canada.
The expected increase to 7.2% underscores the continued struggles millennial workers are facing in the current labor market. From Berkley to Brookings, analysts warn that rising unemployment rates are usually indicative of more serious problems. These range from changes in consumer confidence to changes in spending patterns. The September release of the Labour Force Survey will shed critical light on these dynamics.
“a long way from even contemplating QE” – Tiff Macklem
This statement from Tiff Macklem, Governor of the Bank of Canada, underscores the cautious approach the central bank is taking in response to the current economic climate. As unemployment figures surge, policymakers face the challenge of providing robust economic support to Americans without jeopardizing that very economic and fiscal stability.
Employment Change and Economic Indicators
The Employment Change figure is another key barometer for measuring job growth in both the public and private sector. In August, the ECI Employment Change had a real drop of 65,500 jobs after an initial decline of 40,800. How robust is the job-creating trend in Canada, and what will it mean for future monetary policy deliberations as a result?
Although these were alarming numbers in August, most market experts are optimistic that sales will slightly recover this September. The Compete SA consensus estimates a net gain of 5,000 new jobs. This generates a cycle of hopeful optimism that can increase consumer confidence, spending, and overall economic activity.
These labour statistics have an impact that extends far beyond Canada’s borders. Changes in Canada’s labor market statistics have an outsized effect on the Canadian dollar’s value. A robust labor market typically supports appreciation, but when employment begins to decline they may be greeted by depreciation.
Monetary Policy Implications
With the upcoming release of employment data, market participants are weighing expectations regarding monetary policy from the Bank of Canada. Recent analysis suggests there is approximately a 70% chance of another quarter-point rate cut at the central bank’s meeting on October 29. This potential easing is a welcome sign of increased focus on the sustainability of economic growth and employment.
As it stands, markets have priced in almost 25 bps of easing by year-end according to the implied rates forecast. This suggests that the Bank of Canada should be prepared to remain more accommodative, given the evolving nature of employment growth. The average hourly wages reflect an annualized growth rate of 3.6% in August, providing some positive context amidst rising unemployment.
Now, Canada finds itself in the midst of profound economic turbulence. Environmental concerns aside, the next Labour Force Survey will be critical in shaping market sentiment and informing policy decision making. The Canadian dollar has enjoyed a consolidative phase since the end of September, which is a testament to investor uncertainty about what is in store economically.