Economy keeps adding jobs as population grows, despite high interest rates

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Ontario Construction News staff writer

The Canadian economy added 35,000 jobs in March amid strong population growth, keeping the unemployment rate steady at near record lows, even as the economy wrestles with high interest rates.

In the latest Statistics Canada labour force survey, the unemployment rate was five per cent for the fourth consecutive month.

The job gains were made primarily in the private sector, however, jobs were lost in construction.

Statistics Canada said the population grew by 0.3 per cent last month, while employment rose by 0.2 per cent.

“The report might not be quite as strong as the headline number might suggest,” Bernard said. “But at the same time, that five per cent unemployment rate highlights the big-picture story, which is that the job market remains in solid shape.”

Over the last six months, the Canadian economy has added nearly 350,000 jobs, surprising economists who are anticipating a slowdown. It’s also making it harder to interpret what is going on in the economy and how high interest rates are affecting it.

According to a bulletin from the Ontario Construction Secretariat, there was a 2.2% increase in the unemployment rate and total ICI building permit values remained almost unchanged with only a 0.1 per cent increase, led by gains in industrial permits.

“From February to March, employment increased from 567.1 thousand to 572.3 thousand, while the labour force grew by an even larger amount from 602.4 thousand to 622.7 thousand. This resulted in a substantial increase in the unemployment rate,” the OCS reports.

Unemployment in Ontario construction rose to 8.1 per cent in March, sitting well above the overall Ontario unemployment rate of 5.4 per cent. This is the highest it’s been since January 2021 (10.1 per cent), and similar to the pre-pandemic March 2019 unemployment rate of 8.8 per cent.

When looking at historic data outside of the pandemic era, the unemployment rate in construction tends to be highest from January-March. Overall, these developments suggest both a seasonal trend and a return to normal pre-pandemic levels.

Total ICI permit value was practically unchanged with only a 0.1 per cent increase from January to February. Industrial permit value increased the most, at 98.3 per cent ($304.4 – $603.3 million). The institutional sector experienced a small 1.5 per cent decrease ($269.5 – $265.3 million). Commercial building permit value experienced a contraction of 35.2 per cent (834.1 – $540.7 million).

RBC assistant chief economist Nathan Janzen said what’s happening in the labour market is more than “just a population growth story.”

“It’s also … labour demand for workers outpacing available supply,” he said.

The Bank of Canada is concerned that if the labour market stays this strong, wages may continue to grow rapidly, something that would make a return to two per cent inflation more challenging.

The Bank of Canada’s aggressive rate hikes since March 2022 are expected to weigh on the economy, with economists forecasting a significant slowdown this year.

Surveys released by the central bank earlier this week showed consumers and businesses are preparing for that slowdown. Consumers said they’re planning to pull back on spending, while businesses are anticipating sales to slow.

That pullback is expected to filter through to the labour market and lead to a rise in unemployment.

And while businesses continued to report labour shortages as a top concern, the surveys showed there are signs that the labour market is easing and job postings are down 15 per cent since last year.

With files from The Canadian Press.

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