Canadian employers added 154,000 jobs in November and the jobless rate plunged to six per cent, further evidence the economy is on track to complete the comeback from the COVID-19 recession by early next year.

Statistics Canada’s monthly Labour Force Survey put the number of working Canadians at 19.3 million, a one per cent increase from February 2020 and effectively the level of employment the economy was on track to achieve by the end of 2021 if the pandemic hadn’t interrupted the trend. The unemployment rate was hovering around 5.5 per cent ahead of the COVID-19 crisis, but a rate of six per cent is closer to the norm.

The employment rate, a separate measure that compares the working population to the overall population, was 61.4 per cent, the highest since February 2020, when the rate was 61.8 per cent.

The numbers should buoy confidence in Canada’s recovery, since both the increase in hiring and the outsized drop in the jobless rate far exceeded the expectations of private forecasters. The Bay Street consensus ahead of Statistics Canada’s latest report on the labour market was for an increase of about 40,000 jobs and an unemployment rate of about 6.5 per cent.

The loonie surged half a cent in a matter of seconds after the hiring numbers were released at 8.30 a.m., as traders compared the Canadian data with disappointing figures coming from the United States, where employers added 210,000 positions in November, less than half of what Wall Street had been expecting.

“A sizable portion of the working population was feeling left out of the recovery,” said Tu Nguyen, an economist at RSM Canada LLP, a unit of RSM International Ltd., the global audit and consulting firm. “The November data, with so many positive trends, tell us that finally these workers are seeing the light at the end of the COVID tunnel.”

To be sure, the near-term outlook is clouded by the emergence of the Omicron variant and the catastrophic flooding in British Columbia. However, all things equal, the November hiring numbers increase the odds that the Bank of Canada will raise interest rates early next year to counter the strongest burst of inflation since the early 1990s.

The report also argues for reduced government spending on stimulus measures, as many of the “guardrails” Finance Minister Chrystia Freeland said would guide her response to the crisis now signal the rescue mission can be wound down.

Total hours worked, one of the more granular data points Freeland said would guide her spending, increased 0.7 per cent from October, returning to pre-pandemic levels for the first time. Youth employment, another of the minister’s guardrails, was 2.6 million in November, as it was in February 2020.

“Canada’s labour market recovery is much broader than a few months ago,” said Arlene Kish, director of Canadian economics at IHS Markit, a financial data firm. “This increases the likelihood that the Bank of Canada will begin raising interest rates earlier than the IHS Markit forecast for a July takeoff.”

Bank of Canada governor Tiff Macklem has said he’d like to orchestrate a “complete” recovery from the recession, implying a bias to leaving interest rates low until most labour-market indicators exceed pre-pandemic levels. However, he expressed increased concern over inflation in October, when the central bank abruptly ended its bond-buying program. The central bank conceded that the upward price pressures it had assumed would fade over 2021 will likely persist into next year, as companies and logistics companies struggle to balance an extreme mismatch in supply and demand.

Macklem and his deputies will take a particular interest in the updated wage data, as it tends to correlate with inflation. Tracking wage growth is tricky at present because the pandemic skewed typical hiring patterns, making year-ago comparisons difficult. Statistics Canada in recent months has been trying to smooth the data by using 2019 as a benchmark. That approach suggests average hourly wages increased 5.2 per cent in November from two years earlier, about the same as the increase in the consumer price index over that period.

Even if wages aren’t yet stoking inflation, there is evidence they soon could be. Wages for new employees were 8.5 per cent higher than two years earlier, Statistics Canada found, while gains for established employees wre only 2.3 per cent. That suggests job switching could become a source of inflation, as employers reported more than a million vacancies in September, a record.

The industries that mostly stayed open during the pandemic, thereby avoiding the compositional shifts that affected those forced to close, are also experiencing wage pressures compared with a year ago. For example, average weekly earnings in the transportation and warehousing industry increased 6.3 per cent in September, compared with an average year-over-year gain of about four per cent between January 2010 and February 2020, according to Statistics Canada’s most recent numbers.

“Labour shortages are only expected to intensify,” said Nathan Janzen, an economist at Royal Bank of Canada. “Lack of labour supply means increased hiring demand is expected to show up more in above-trend wages than employment gains going forward.”

The Bank of Canada in October said it could raise its benchmark interest rate as soon as April, three months sooner than its previous guidance. Macklem and his advisers were spooked by the consumer price index’s surge to year-over-year rates of growth approaching five per cent, well outside the central bank’s comfort zone of increases of one per cent to three per cent.

“Today’s data helps to keep the Bank of Canada on track to continue with its normalization path,” said Ima Sammani, a foreign-exchange analyst at Monex Europe Ltd., the global payments processor. 

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