By Robb M. Stewart
OTTAWA--Strong hiring in the final months of 2024 has dulled expectations the Bank of Canada will feel compelled to cut interest rates again this month, though lingering labor-market softness and heightened business concerns still leave the door open for easing to continue this year.
Employers in the country added 90,900 jobs in December, Statistics Canada said Friday. That was much stronger than the about 25,000 jobs economists expected would be added to the economy and comes after a stronger-than-expected 50,500 jobs were filled the month before. Employment has now risen meaningfully in three of the last four months despite the upward trend in the jobless rate the last two years.
The boom in hiring last month, the strongest in almost two years and driven largely by full-time work, outpaced continued growth in a labor market that has expanded rapidly the past year, thanks to immigration-fueled population growth. That left the unemployment rate for December at 6.7%, a tick below 6.8% in November and against expectations it would rise to 6.9%.
The year ended with 413,400 more people working in Canada than a year earlier, though the labor force expanded by 661,700 in that time. For the first time since January 2023, the proportion of the working-age population who were employed increased, edging up 0.2 percentage point to 60.8% after holding steady the month before.
The jobs survey is the first major economic indicator of the year and sets the tone for the central bank's policy meeting later this month, leaving open the possibility interest rates might remain steady after being cut at each Bank of Canada meeting since last June.
The data agency's labor force survey overall paints a positive picture for the job market in Canada, countering some of the concerns around the steady rise in the unemployment rate from 5% at the start of 2023. Most of the country's provinces saw increased hiring, most industries experienced job growth, and the number of hours worked rose. Wage growth again cooled, further easing any worries about lingering inflationary pressures, though average weekly earnings were still rising ahead of the now subdued pace of broader consumer inflation.
"The Canadian job market ended 2024 on an upbeat note, in line with our view that the broader economy was getting up off the mat," said Douglas Porter, chief economist at Bank of Montreal. "The solid job gains will prompt some meaningful doubt on whether the Bank of Canada will cut again in January."
Economists also point to the depreciation in the Canadian dollar in recent months and a Federal Reserve that looks to have moved to the sidelines as further grounds for Canada's central bank to pause after cutting its benchmark rate by a full percentage point at just the last two policy meetings of 2024. Market pricing for a pause by the Bank of Canada rose to roughly 40% from 30% after the job report.
Still, hiring intentions remain soft and businesses in Canada may be hesitant to fill jobs given the political and trade uncertainty that has built as President-elect Trump looks to return to the White House promising hefty tariffs on imports from America's closest neighbors. The rise in December job numbers and hours worked may also in part reflect a rebound with the end of strikes that month by postal employees and workers at maritime ports on the east and west coasts. And while it dipped, the jobless rate in November was the highest since the start of 2017, outside the peak of the pandemic.
Dominique Lapointe, director of macro strategy at Manulife Investment Management, is among those still penciling in a quarter-point cut by the Bank of Canada on Jan. 29. "By then we might have additional details on U.S. tariffs, but even under a scenario of no immediate tariffs the BoC is likely to cut one more time, almost preventively, to account for the significant business environment uncertainty tariffs threats generate," Lapointe said.
Hiring in the U.S. also blew past expectations, with 256,000 jobs added last month and the unemployment rate edging down to 4.1%. The U.S. economy performed much more strongly than Canada's last year, though recent data suggest Canadian gross domestic product likely picked up in the final quarter of the year after cooling in the third quarter to just 1% annualized.
When calculated using U.S. Labor Department methodology, Canada's unemployment rate was 0.1 percentage point lower at 5.8%.
Statistics Canada's survey showed 57,500 of the jobs added in December were full-time, while part-time roles increased by 33,500. The public sector was for a second straight month the source of much of the strength, though numbers were also up for the private sector and among those self employed last month.
Over the 12 months through December, the ranks of the public sector rose by 158,500, driven by education, health care and social-assistance jobs, while private-sector employment increased by 190,600. At the same time, those who were self-employed increased 64,300.
Average hourly wages for permanent employees were up 3.7% in December from a year earlier, slightly softer than the 3.8% advance economists anticipated and a drop from a 3.9% annual advance in November. Overall average hourly wage growth was the softest since May 2022.
Bank of Canada officials last month indicated that with inflation now around the 2% target, the pace of rate cuts would be more gradual in 2025.
"We continue to think it is unlikely that the broader uptrend in the unemployment rate has ended, with hiring demand still running well below year-ago levels," said Nathan Janzen, assistant chief economist at Royal Bank of Canada, who continues to anticipate the central bank will need to cut its policy rate this year to levels that would be slightly stimulative for the economy.
Write to Robb M. Stewart robb.stewart@wsj.com
(END) Dow Jones Newswires
01-10-25 1304ET
