The Canadian labour market lost 200k positions in January, worse than the consensus call for a loss of 120k positions. Full-time (-83k) and part-time (-117k) employment fell on the month.
Even with the labour force participation rate dropping 0.4 percentage points, to 65%, job losses pushed the unemployment rate 0.5 percentage points higher to 6.5% in January.
By industry, services-producing employment fell 223k, with food services leading the way, down 113k. Meanwhile, employment increased in the goods-producing sector (+23k), with the construction industry (+23k) once again driving the gains.
By province, employment was down mostly in Ontario (-146k) and Quebec (-63k), the two provinces most directly impacted by public health restrictions.
Lastly, total hours worked fell 2.2% month-on-month, ending the streak of advances that started in July 2021.
Key Implications
This was sure to be a negative report. The Omicron wave and associated lockdowns forced many businesses to adjust on the fly. They did this by cutting jobs and hours significantly. Notably, all of the increase in unemployment was due to more people on temporary lay-off or scheduled to start a job in the near future, suggesting the setback will be short lived.
With reopening already underway, we expect a big bounce back when the February data are released next month. Canadian businesses and workers have been incredibly resilient through all the stops and starts over the last two years. This wave should be no exception.
The Bank of Canada should be confident that employment will rebound swiftly and will still execute on its first rate hike in March. Market pricing hasn’t budged off this and Canadian bond yields are up this morning.
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