Data from November showed continued signs of Canada's labour market moderating. The labour market has served as a source of strength for Canada's economy as it emerged from the early stages of the pandemic. A robust labour market resulted in strong Canadian consumers, who pushed spending higher. However, momentum is softening due in part to the aggressive actions by the Bank of Canada (BoC) over the past two years.

• The Canadian economy added 24,900 jobs in November, which was up from the previous month but remains at relatively modest levels. Job additions were concentrated in full-time employment, whereas part-time jobs declined over the month.
• The manufacturing sector added 28,000 jobs in November, contributing to the overall gain. However, this was partly offset by a drop in retail trade and finance jobs.
• Canada’s unemployment rate rose to 5.8% in November, its highest since January 2022. The number of unemployed persons increased over the month. While job additions grew, they did not keep pace with the increase in the labour force, which rose by 36,000.
• The BoC will make its final interest rate announcement of 2023 tomorrow. Markets are currently expecting the BoC to hold steady at 5.00%. By comparison, the benchmark overnight interest rate stood at 0.25% at the end of 2021.

The slowdown in inflation, economic growth and the labour market likely have the BoC on pace for another rate hold at its December meeting. It is a precarious time for the Canadian economy, households and businesses. Expectations are rising for the BoC to soon be in a position to begin reducing interest rates in 2024. The last month of the year gives you some opportunity to position your portfolio based on your expectations of the economy and central bank actions next year.

Please contact me to discuss how a slowdown in Canada’s labour market might impact your portfolio.