Canada’s November Labour Force Survey will be pivotal for judging whether recent job gains reflect genuine labour-market improvement or mere statistical noise. Beneath the surface, private-sector hiring looks recession-like, while wage growth is accelerating at a pace inconsistent with the Bank of Canada’s inflation target, National Bank of Canada economists Matthieu Arseneau and Alexandra Ducharme report.

Private-sector job fragility deepens, despite wage growth surge

"The November data from the Labour Force Survey (LFS, conducted among households) will be published this Friday. These figures are eagerly awaited, as they will reveal whether the upturn of the last two months is confirmed or whether it was a statistical fluke. This momentum indeed contrasts with soft data showing a weak appetite for hiring."

"Skepticism grew last week with the release of the Survey of Employment, Earnings, and Hours (SEPH, conducted among businesses). This showed a monthly loss of 58K jobs in September, while the LFS reported a gain of 26K after adjustments for comparability. Over six months, employment in only 41% of private sector industries (out of 251) is growing, which is a proportion usually seen only in recession."

"However, this fragility has not prevented wages in the private sector from accelerating, rising at an annualized rate of 5.5% over the last six months, a pace that is incompatible with bringing inflation back to target. The wage dynamics in Canada are limiting the Bank of Canada's ability to further lower the policy rate."