Tuesday, February 27, 2024

London-area jobless rate holds steady, offers reason for optimism

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Think of it as a sign of stability amid uncertain economic times.

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Think of it as a sign of stability amid uncertain economic times.

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Despite high inflation and a housing market seeing one of its worst starts to the year in decades, London’s economy kept moving along last month, adding 900 new jobs in February, the latest snapshot of the area labour market shows.

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It wasn’t the strongest of performances, but good enough to help keep the unemployment rate for the London region, which also includes Strathroy, St. Thomas and portions of Elgin and Middlesex counties, virtually unchanged at 5.1 per cent.

It also comes after the city added 1,700 new positions in January, putting in the rear-view mirror the second half of 2022 that saw London’s unemployment job edge up while shedding positions almost every month.

In total, 298,100 people were employed in the London region last month, Statistics Canada said Friday.

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At the same time, the area’s participation rate – the percentage of the adult population either working or looking for work – remained steady at 65.2 per cent.

As was the case locally, employment held steady in both the province and the country after two months of strong job gains.

Ontario’s jobless rate was little changed in February, sitting at 5.1 per cent last month Statistics Canada said.

Nationally, the country added 22,000 jobs, with the jobless rate staying at five per cent.

Despite the rather small increase – especially compared to the 150,000 jobs added in January – some economists raised concerns a bustling labour market could lead to more interest rate hikes only days after the Bank of Canada decided to leave its monetary policy unchanged.

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“This is a concern because it means higher wages, which can feed through to higher inflation, and it could derail the Bank of Canada’s efforts to bring inflation down,” said TD’s director of economics James Orlando.

Overall, the country has been gaining new jobs since September of last year. There also were 348,000 more people employed in the country last month than in February of 2022, Statistics Canada said.

Unemployment still is expected to rise in the coming months as high interest rates take the steam out of spending, slowing the economy.

Signs of that slowdown already are apparent. In the fourth quarter, the Canadian economy was treading water, posting zero per cent growth.

But Orlando cautioned against focusing only on the headline growth rate. Beneath that number was an uptick in consumer spending, suggesting high interest rates are not bogging down consumers.

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The economist said the concern isn’t just that interest rates are taking a long time to cool the economy.

“It looks like there’s a resurgence in some of this data, specifically in the labour market and in the Canadian consumer,” he said.

“The Bank of Canada needs to see a turn in the economy. We cannot keep getting job growth.”

With affordability top-of-mind for many Canadians, the latest jobs report shows the gap between wage growth and inflation is narrowing. Average hourly wages were up 5.4 per cent in February compared with a year ago, while the annual inflation rate was 5.9 per cent in January.

The Bank of Canada, which is working to bring down the country’s high inflation rate, has raised concerns a sustained four to five per cent wage growth will make it harder to return to its two per cent inflation target.

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But the central bank says it expects the labour market to ease in the coming months, as higher interest rates slow spending by people and businesses.

At its latest interest rate announcement, the Bank of Canada held its key rate steady at 4.5 per cent, the highest it’s been since 2007.

Though higher interest rates already have taken a toll, the full effect is still ahead, as economists estimate it can take up to two years for rate hikes to be digested by the economy.

With files from the Canadian Press

jjuha@postmedia.com

Twitter.com/JuhaatLFPress

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