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Canadian Economy Unable To Create Enough Jobs For Population Growth: BMO – Better Dwelling

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The Canadian economy surprised with huge job gains last week. Statistics Canada (Stat Can) data shows tens-of-thousands of jobs were added in April. Despite a near-record gain, BMO warned investors the market isn’t as healthy as it sounds. Canada’s booming population growth meant the job gains failed to meet minimum requirements. As a result, the country’s unemployed population further expanded. Over the past year, the data implies just 1 in 3 new workers found employment at the margin. Not exactly supporting the boom-time narrative. 

Canada Added 90k Jobs Last Month… But 107.5k Workers 

Let’s start with what you heard—Canada’s job market added a near-record volume of jobs last month. Seasonally adjusted, April saw a net increase of 90k jobs, making it one of the biggest months ever. A point that influenced near-term expectations, and policymakers even bragged about. 

However, there was a caveat—Canada’s population growth outpaced new jobs. Stat Can data shows a net gain of 107.5k workers over the same period. The unemployment rate was reported as flat, but actually rose a slight 0.05 points. Record population growth requires record job gains just to break even. Job gains were far from actually meeting the demand for jobs created via immigration. 

Source: BMO. 

The Bank of Canada (BoC) interpretation of this data is up for debate. Are job gains enough to delay cuts, like the US Federal Reserve is currently debating? Or will the central bank note this isn’t enough to meet job demand, and require stimulus? 

“Our view on Canadian employment reports is generally that they are so volatile that the Bank of Canada doesn’t read that much into them, and neither should we,” explains Douglas Porter, chief economist at BMO. 

Canada’s Unemployed Population Is Up 24%, Recession Typical At 25% 

Those looking for insights should focus on the longer trend, suggests Porter. He notes the general rule is the unemployed population growing 25% or more results in a recession. Canada is currently at 24% annual growth, just a point shy. Risk is building, just not in a traditional sense.

How is this possible with such huge job numbers? The bank’s analysis doesn’t mince words, and just cranks out the raw data. Canada may have added 377k jobs over the past year, but it also added 633k workers too. That’s 256k more workers than jobs, meaning less than 35% of net new adults found employment at the margin. 

“The bottom line is that the economy is simply not able to create enough jobs to keep up with population growth, and that was even the case in April,” concludes Porter. 

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