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Canada Adds 157,100 Jobs in September, Employment Returns to Prepandemic Level — Update

By Kim Mackrael and Paul Vieira

 

OTTAWA–The Canadian economy surprised with a much larger than expected jobs gain in September that returned the employment level back to its prepandemic level and brought the unemployment rate below 7% for the first time since the widespread shutdowns in the spring of 2020.

The strong data reinforced expectations among some economists that the Bank of Canada could move into the so-called reinvestment phase of its quantitative easing program later this month. During that phase, the bank would purchase only enough bonds to replace those that are maturing, marking a significant milestone in the wind-down of the extraordinary stimulus extended during the pandemic.

Statistics Canada reported Friday that the Canadian economy added a net 157,100 jobs in September, following a 90,200 gain in the previous month. Market expectations were for a 60,000 advance in September, according to economists at TD Securities.

The unemployment rate fell to 6.9%, matching market expectations and marking the first time it dipped below 7% since the onset of the pandemic. Prior to the pandemic, Canada’s unemployment rate stood at 5.7%. When calculated using U.S. Labor Department methodology, Canada’s unemployment rate in September was 5.6%.

“September’s job report was nothing short of stellar,” Desjardins Securities economists Jimmy Jean and Mikhael Deutsch-Heng wrote in a note on Friday. They said it should reinforce the Bank of Canada’s confidence in the economic recovery and increase the likelihood that the central bank will further pull back on its quantitative easing program.

The U.S. economy, meanwhile, added 194,000 jobs in September and its unemployment rate fell to 4.8%, as a tight labor market and ongoing concerns about the Delta variant of Covid-19 held back hiring.

Canada’s strong employment result for September offers another sign that the domestic economy is picking up after a spring slowdown that was driven in part by global supply-chain disruptions. The country’s gross domestic product contracted at a 1.1% annualized rate in the second quarter and then dipped slightly on a month-over-month basis in July. An early estimate from Statistics Canada suggests an advance of 0.7% in August from the previous month.

Economists said the data so far puts the economy on track for solid growth in the third quarter, but likely at a slower pace than the Bank of Canada’s most recent forecast, which anticipated 7.3% annualized growth during the July-to-September period.

Bank of Canada Gov. Tiff Macklem said during a press conference Thursday that the central bank still anticipates a good rebound in GDP growth during the third quarter. However, he said supply chain disruptions mean it will probably be “a little bit slower than what we put out in July.”

The recent surge in Covid-19 cases powered by the Delta variant has been relatively well contained in Canada compared with the U.S. and some other major economies, in part because of Canada’s high vaccination rate.

The central bank’s next interest-rate decision is due Oct. 27. Several economists said Friday’s jobs data is likely enough to convince policy makers to pull back further on the bank’s bond-buying program, which is currently targeting a weekly level of 2 billion Canadian dollars, or the equivalent of $1.59 billion. A reduction to C$1 billion, which some economists anticipate, would bring the central bank into what it refers to as a reinvestment phase, where it is no longer incrementally adding more stimulus to the economy.

Although the labor market isn’t yet fully healed, CIBC Capital Markets analyst Royce Mendes said the September employment data likely “seals the deal” for another taper in the quantitative easing program.

The September report indicated that all of the net jobs added during the month were full-time positions. The private sector added about 98,000 positions, while the public sector advanced by about 78,000. The ranks of the self-employed — who tend to be independent contractors — were little changed in the month.

Hours worked in September rose 1.1%, although they remain below their prepandemic level. The labor-underutilization rate, or the proportion of people either unemployed or working fewer than usual hours, fell slightly to 13.8% in September.

 

Write to Kim Mackrael at [email protected] and Paul Vieira at [email protected]

 

Corrections and Amplifications

This article was corrected at 10:07 a.m. ET because it had an incorrect exchange rate. The central bank’s bond-buying program is currently targeting a weekly level of 2 billion Canadian dollars, or the equivalent of $1.59 billion, not $12.59 billion.

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