Canada adds 37,300 jobs in January, wage growth slows

Canada's economy added net 37,300 jobs in January, beating expectations, while wage growth decelerated slightly in January, data showed on Friday, likely creating a tricky situation for the Bank of Canada under pressure to start cutting interest rates. The unemployment rate in Canada edged down to 5.7% from 5.8% in December, posting its first decline in 13 months, Statistics Canada said.

Canada's economy added net 37,300 jobs in January, beating expectations, while wage growth decelerated slightly in January, data showed on Friday, likely creating a tricky situation for the Bank of Canada under pressure to start cutting interest rates.

The unemployment rate in Canada edged down to 5.7% from 5.8% in December, posting its first decline in 13 months, Statistics Canada said. Analysts polled by Reuters had forecast net job gains of 15,000 and for the unemployment rate to rise to 5.9%.

The average hourly wage growth for permanent employees slowed to 5.3% in the month from 5.7% in December. The Bank of Canada (BoC) closely tracks employment data to gauge the health of the economy and the year-over-year wage growth to keep a tab on changes in purchasing power.

Higher job gains or faster wage growth can affect the central bank's effort to sufficiently cool inflation and start lowering interest rates. The central bank expects economic growth to remain soft in the first quarter of 2024 and expand by a modest 0.8% for the full year. Wage growth has largely been above 5% all of last year and continues to be one of the prime drivers of underlying inflation in the country.

The bank has kept its key overnight rate at a 22-year high of 5% since July, as its strives to bring inflation back to its 2% target. January's job gains were led by part-time work, and entirely in the services sector. Largest job additions were in the wholesale and retail trade, followed closely by finance-related jobs.

The goods sector lost jobs, led by construction and manufacturing sector.

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