Unemployment rate dips to 6.9% as fewer people look for work

Canada's unemployment rate declined 0.2 percentage points in September to 6.9 per cent, as the country gained 11,900 jobs, but analysts say the improvement was dampened by the fact that fewer people participated in the labour force and wage gains were barely above inflation.

Canada gains 11,900 jobs, above analyst expectations

Workers operate the brake handle on a drilling rig in the Bakken shale formation near Oungre, Sask. The natural resources sector gained 19,000 jobs in September, with employment in the sector up almost five per cent over a year ago. (Rod Nickel/Reuters)

Canada's unemployment rate declined 0.2 percentage points in September to 6.9 per cent as the country gained 11,900 jobs, slightly more than the 10,000 expected by analysts, according to the most recent Statistics Canada labour force survey.

Year-on-year, there was a gain of 212,000 jobs, but that rise was offset by a comparable increase in the working-age population, meaning the employment rate was little changed, rising just 1.2 per cent compared with a year ago, according to the survey released Friday.

The September job gains were also offset by a decline in the rate of eligible workers participating in the job market, which stood at 66.4 per cent, 0.2 percentage points lower than in August and the lowest level since 2002. The labour force shrank by 25,100 people between August and September.

"In an echo of the U.S. trend, much of the improvement reflects a fading in the participation rate and not fundamental strength in jobs growth," said Douglas Porter, chief economist at BMO Capital Markets, in a note to investors.

Analysts generally see a dip in the unemployment rate below seven per cent as significant because it indicates the rate is approaching what is considered the country's "natural" unemployment rate, but Porter said the shrinking labour force and lucklustre wage gains might put a different spin on that interpretation.

"The drooping participation rate may force a rethink on what constitutes Canada’s natural rate of unemployment," he wrote. "The rule of thumb used to be 6.5 per cent, but it's now likely lower than that — we're already at 6.9 per cent with no sign of wage pressures."

Wage gains tepid

Wages rose just 1.8 per cent year-on-year in September, better than August's rise of 1.5 per cent but still "barely better than recent inflation trends," Porter pointed out.

RBC agreed in its analysis of the job numbers that the pace of wage gains has been "sluggish." Hourly wage increases have slowed to an average of 1.6 per cent in the third quarter of 2013, compared to 2.9 per cent in 2012, RBC assistant chief economist Dawn Desjardins stressed in a note to clients.

That, along with an unemployment rate for the third quarter of 7.1 per cent, which is in line with the 10-year average, shows there is still some "slack in the labour market" owing to lukewarm economic growth in the first part of the year, Desjardins said.

"The economy generated 32,000 jobs in the third quarter, a lacklustre performance but strong enough to prevent the unemployment rate from moving higher, " she wrote.

Desjardins said she expects job growth to pick up in step with the economy.

Manufacturing, public administration lose jobs

The job gains in September were primarily in the private sector and were concentrated in finance, insurance, real estate and leasing as well as natural resources and agriculture while manufacturing and public administration saw employment go down.

The public administration sector lost 17,000 jobs in September. The industry has been losing jobs since February and has seen employment decline by 7.2 per cent over that period.

Manufacturing lost 26,000 jobs in September, and employment in that sector dropped 4.1 per cent year-on-year. Construction was also hard hit last month, losing 14,000 jobs.

"The weakness in these two key sectors is the one main sour note in today's report," Porter said.

The natural resources sector, meanwhile, saw a 4.7 per cent increase in employment year-on-year and gained 19,000 jobs in September, which was the second-strongest increase after the financial services sector, which gained 33,000 jobs.

Overall, there were more private-sector employees in September but fewer self-employed.

Statistics Canada said that since September 2012, part-time employment has grown at a faster rate than full-time employment, resulting in a rise in the number of hours worked of just 0.8 per cent year-on-year. In September, the number of hours dropped 0.2 per cent from a month earlier.

There were 23,400 full-time jobs created in September, while part-time jobs declined by 11,500 after the August boost of almost 42,000 jobs.

Jobs across the provinces

Regionally, employment increased in New Brunswick and dropped in Saskatchewan, but the other provinces saw little change, Statistics Canada said.

Saskatchewan saw the biggest year-on-year increase in jobs after Alberta. Employment in the province rose 3.1 per cent over a year ago, and its unemployment rate was a mere 4.3 per cent, the same as Alberta's and the lowest in the country.

There were 21,400 fewer young people (between ages 15 and 24) looking for work in September, which, along with an increase of 15,700 jobs, brought the unemployment rate in that demographic down to 12.9 per cent from 14.1 per cent in August.

In Ontario, the effect of the youth population withdrawing from the job market as school resumed in September pushed the unemployment rate down 0.2 percentage points to 7.3 per cent. 

"Compared with 12 months earlier, employment in the province grew by 1.7 per cent, above the national average of 1.2 per cent," Statistics Canada said.

A similar effect in Quebec saw that province's unemployment rate fall 0.3 percentage points to 7.6 per cent. It gained 15,500 part-time jobs in September but lost 500 full-time jobs.

Newfoundland and Labrador didn't register any job gains in September but saw its unemployment rate improve 0.3 percentage points to 10.4 per cent, the lowest level in 37 years according to BMO, as its participation rate declined to 59.9 per cent from 60.4 per cent in August. 

The country's job gains and improvement in the unemployment rate won't be enough to change the Bank of Canada's policy of keeping its benchmark interest rate at one per cent to stimulate economic growth, RBC's Desjardins said.

"Only once the economy's momentum has improved and there is a commensurate firming in labour market conditions will the process of the 'normalization of policy interest rates' begin," she wrote.


To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.

Become a CBC Member

Join the conversation  Create account

Already have an account?