Canada’s job market surprised with a solid job gain last month. The 37,300 employment improvement was ahead of the 16,000 Bloomberg consensus, though all the gains were in part-time jobs. More importantly, the unemployment rate actually declined for the first time since December 2022 to 5.7%, supported by a lower labour force participation rate.

Employment in Alberta picked up steam in January, rising 10,100 following a 5,000 increase in December. The service sector was responsible for the January uptick, with a notable increase in transportation, finance/insurance/real estate, and educational services, offsetting declines in the goods sector (particularly construction). All the new jobs added were full-time, offsetting part-time losses, and concentrated in the public sector and self-employment categories.

Year-over-year employment growth in January stood at 3.5%—well ahead of the 1.7% national gain. Employment outpaced the labour force, nudging the unemployment rate down 0.1 points to 6.2%.

Today’s report was stronger than expected. In 2024, we are still expecting a slowdown in job growth. Businesses have scaled back their hiring plans amid slowing demand and prolonged exposure to higher financing costs. Job vacancies, while still well above pre-pandemic levels, have dialed down. However, as we’ve noted, there are pockets, like in construction, food and accommodation, and transportation, where vacancy rates remain elevated.

For the Bank of Canada, this report should reinforce a cautious approach. Wage growth is still running hot at more than 5% year-over-year—well above what the Bank says it should be for inflation to return to 2%, especially given lagging productivity. While the main gauge will be the upcoming Consumer Price Index readings, the Bank is keeping a close eye on the labour market and will continue to raise wage stickiness as an inflation concern. That said, with rapid population growth and labour force entry, job growth will need to stay strong to prevent the Canadian unemployment rate from rising further. Recent declines in the participation rate have kept the jobless rate lower. The employment rate—the share of the 15+ population working—fell for the fourth consecutive month. This points to more slack in the labour market, which should ultimately translate into softer wage pressures going forward.

Answer to the previous trivia question: As of last year, Mexico is the largest trading partner of the United States (as measured by the combined value of merchandise exports and imports).

Today’s trivia question: Where is the 2024 NFL Super Bowl being held?