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Canada Job Creation Stalls in October -- Update

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11/08/2019 | 09:27am EST

By Paul Vieira

OTTAWA -- Job creation in Canada unexpectedly stalled in October after two straight strong showings, as declines in the country's manufacturing and construction sectors was offset by hiring in the government sector.

Despite the setback, the unemployment rate was unchanged and close to a four-decade low. Employment growth on a one-year basis remains elevated on a historical level, fueled by full-time job creation. And average hourly wages surged on an annual basis by over 4% for a fifth straight month.

The Canadian economy shed a net 1,800 jobs in October on a seasonally-adjusted basis, Statistics Canada said Friday. Market expectations were for a 17,000 gain, according to economists at TD Bank.

This follows notable employment gains of 81,000 and 54,000 in August and September, respectively. Canada's employment report has a history of volatility on a month-over-month basis.

The jobless rate was 5.5% in October, which matched market expectations. When using U.S. Labor Department methodology, Canada's unemployment rate was 4.4% in October. The jobless rate in the U.S. stood at 3.6%, according to October data.

Average hourly wages rose 4.3% in October from a year before, matching the advance from September. Annual hourly wages on a 12-month basis have climbed by more than 4% for five consecutive months, after starting the year closer to 2%.

The employment report comes a week after the Bank of Canada issued a cautious outlook for the economy, signaling it would be open to a rate cut if the fallout emanating from the global-trade conflict escalates. Unlike its developed-world peers, the Bank of Canada has refrained from recent rate cuts, in part because of strong labor-market data and a pickup in wage growth.

The Bank of Canada does forecast a slowdown in growth in the second half of this year, in part because of an outright decline in exports and business investment. After recording 3.7% annualized growth in the second quarter, indicators to date for the third quarter suggest output is on pace to expand close to the Bank of Canada estimate of 1.3%. Growth in 2019 is expected to clock in at 1.5%.

Economists say Canada's strong labor-market figures can be attributed to a variety of factors. Population growth -- the highest among Group of Seven economies -- has provided a natural lift to economic growth and employment. Also, the sectors fueling Canada's employment growth are relatively less exposed to trade wars, such as professional services, health care, and transportation and warehousing -- the latter of which TD Bank economist Brian DePratto calls the "Amazon effect," in reference to the online retailing company.

Canadian employment growth has averaged 44,300 a month on a three-month basis, and 22,400 on a six-month basis.

Canada's October jobs report indicated full-time employment fell 16,100, while part-time employment climbed 14,300. The October report said the ranks of the self-employed, who tend to be independent contractors or freelancers, shrank by 27,800. Public-sector organizations, meanwhile, added a net 28,700 in the month.

The gain in public-sector employment was partly attributed to hiring by Canada's elections agency to help administer the Oct. 21 national election.

The report said the private sector shed a net 2,700 jobs. The bulk of those were focused in manufacturing, down 23,100, and construction, down 21,300.

The decline in the factory sector was the biggest on a monthly basis since March 2016. The data agency said job cuts among plastics and rubber producers weighed on manufacturing employment sector.

Write to Paul Vieira at paul.vieira@wsj.com<mailto:paul.vieira@wsj.com>

Write to Paul Vieira at paul.vieira@wsj.com

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