Uptick in Wage Growth Raises Risk that
Interest Rates Remain Higher for Longer
Labour market beats expectations in 2023. Canada’s total employment held unchanged in December. The 43,000 rise in service employment was offset by a similar drop in the goods sector. While this unchanged reading was weaker than the consensus of a 13,500 rise, Canada’s labour market performed better than expected in 2023. Total job gains reached just over 430,000, which translated into a 2.2 per cent annual gain in total employment. Although the unemployment rate did increase 80 basis points over the course of 2023 to 5.8 per cent, this rise was mainly a result of an increasing labour force amid historic immigration, rather than significant job loss. However, with job gains slowing over the second half of last year, labour demand has weakened significantly. Combined with the expectation that the labour force will continue to grow, the unemployment rate is forecast to trend up and peak at roughly 6.5 per cent this year.