Market News

By Randy Thanthong-Knight

(Bloomberg) -- Canada’s biggest employment gains since April failed to prevent the jobless rate from surging to the highest level in three years, likely bolstering the case for the central bank to keep cutting rates at a faster pace.

The country added 51,000 positions in November, but it wasn’t enough to absorb a rise in the number of people looking for work or who were on temporary layoff, leading the unemployment rate to jump 0.3 percentage points to 6.8%, Statistics Canada said Friday. Economists in a Bloomberg survey were expecting a gain of 25,000 positions and jobless rate of 6.6%.

While jobs gains beat expectations, the public sector accounted for almost 90% of the jobs added in November. After rising a full percentage point in ten months, the unemployment rate is now the highest since January 2017 outside of the pandemic.

After the release, government of Canada two-year bond yields plunged eight basis points to 2.942% while the loonie tumbled to C$1.409 per US dollar as of 9 a.m. Ottawa time. Traders in overnight swaps boosted the odds of a 50 basis-point cut at the Bank of Canada’s decision next week at more than three-quarters, from about a coin flip previously. The report was released at the same time as US nonfarm payrolls, which rose by 227,000 while the unemployment rate ticked up to 4.2%.

The report underscores ongoing labor market softness that had already convinced the Bank of Canada to ramp up the pace of rate cuts with a 50 basis-point reduction in October. Before the release, some economists had already expected another outsize cut at its next decision on Dec. 11.

“Today’s data was the final piece of the puzzle before next week’s Bank of Canada decision, and even though the piece didn’t fit perfectly, we still see the picture of a struggling economy that needs the help of another 50-basis point reduction in rates,” Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a report to investors.

Economists at the Bank of Montreal flipped their call for next week’s meeting to a 50 basis-point cut from 25. “When the facts change, we change, and the sharp rise in the unemployment rate is a big change. We’re now expecting the Bank of Canada to cut 50 basis points at next week’s meeting. Get ready for a much weaker Canadian dollar and housing to get reignited,” Benjamin Reitzes, rates and macro strategist, said in an email.

The employment rate — the proportion of the working-age population that’s employed — held steady at 60.6% in November, after falling for six straight months from May to October. Job growth in the month kept pace with gains with the working-age population.

The number of unemployed people soared 6.1%, bringing the total number to 1.5 million. Nearly half of the people in this group hadn’t worked in the last year or had never worked.

The youth unemployment rate rose 1.1 percentage points to 13.9%. The participation rate edged up 0.3 percentage points to 65.1%.

Yearly wage growth for permanent employees decelerated sharply to 3.9% in November, from 4.9% in October, below the 4.7% rate anticipated by economists. That’s the slowest pace since June 2023.

This is the last of two job reports between the central bank’s October and December decisions. The first report last month showed the economy added fewer positions than expected while the jobless rate held steady.

Other economic data since then haven’t settled the debate over whether the bank should cut by 25 or 50 basis points next week. While inflation reaccelerated to 2% and retail sales and the housing market showed signs of revival, third-quarter output grew slower than expected, with the threat of US tariffs adding to uncertainty next year.

Job gains in November were led by wholesale and retail trade, construction, professional services, educational services and accommodation and food services. Manufacturing, transportation and natural resources, on the other hand, saw job losses.

Regionally, employment rose Alberta, Quebec, Manitoba and Prince Edward Island, while it was little changed in the other provinces.

--With assistance from Erik Hertzberg and Jay Zhao-Murray.

(Updates market line in paragraph four, adds more economist reaction.)