Canadian employers added roughly 31,000 jobs in October, a mediocre result that suggests the recovery from the COVID-19 recession could be slowing to a more sustainable pace.

Bay Street economists had predicted the economy would add about 50,000 positions last month, after creating more than 157,000 in September, as COVID-19 restrictions loosened and vaccination rates continued to rise. The increase that Statistics Canada recorded in its latest Labour Force Survey was less than the poll’s margin of error, suggesting employment was little changed.

Bond prices and the Canadian dollar were little changed on the news, suggesting that investors are content to see the recovery cool. Financial markets, like much of the general public, have shifted their attention to inflation, which has accelerated in many big economies over the second half of the year. Slower growth could ease inflation worries, although most of the pressure is coming from a series of idiosyncratic supply constraints related to the pandemic and climate change.

Canada’s unemployment rate decreased to 6.7 per cent from 6.9 per cent, the fifth consecutive monthly decline. Employment in retail increased by some 77,000 positions, a large gain that pushed jobs in the industry back above pre-pandemic levels for the first time since March 2021, just before another wave of COVID-19 infections forced provinces to tighten social-distancing rules.

Hiring at food services and hospitality companies declined, the latest evidence of a mismatch in the demand for restaurant workers and the supply of individuals interested in working in an industry notorious for relatively low wages and gruelling hours. The federal government ended emergency unemployment programs on Oct. 23, which could force some workers to return to the restaurant business, although many economists and academics are skeptical that benefits that barely covered shelter, food and the internet adequately explain the unusually high number of vacancies.

“Disruptions are clearly holding back progress in certain sectors,” said Benoit Durocher, an economist at Desjardins Group. “The labour shortage is slowing down hiring. On the other hand, the introduction of vaccine passports maybe affected business in some areas, which may explain the second consecutive decline in employment in the accommodation and services sector.”

The struggles of Alberta, Saskatchewan and New Brunswick to contain COVID-19 this autumn also likely had an effect on employment.

Overall, the latest hiring numbers support the Bank of Canada’s story about how the recovery is unfolding. The central bank last week expressed confidence in the economy, characterizing both overall growth and the labour market as “robust.”

Evidence of strong demand combined with inflation that is advancing at annual rates well in excess of the central bank’s target caused governor Tiff Macklem to end the bank’s bond-buying program last week. The potential timing of an interest-rate increase also advanced to April from July.

The total number of jobs in the economy in September surpassed its pre-pandemic level, and the participation rate, which measures the number of people working and actively seeking employment, has risen to around 65.5 per cent, the same as at the start of 2020.

Hours worked, an important gauge of economic strength that policy-makers are closely watching, increased about one per cent in October from September and will similarly return to pre-crisis levels this month if the growth trend of the past few months holds.

Still, the labour market is far from healed from the epic recession caused by the onset of COVID-19 lockdowns in March 2020. The jobless rate was hovering around a record low of 5.5 per cent when the crisis began, and employers still need to add another 170,000 jobs to get to where the pre-pandemic trend of hiring would have taken overall employment if not for the recession, according to Citigroup Global Markets Inc. economist Veronica Clark’s rough calculations.

Statistics Canada’s “underutilization rate,” which measures the unemployed, the number of people who want a job but haven’t looked for one, and employees who are working less than half their usual hours, dropped to 13.1 per cent in October, but still elevated compared with 11.4 per cent in February 2020.

“After aggregate employment had fully risen back to pre-pandemic levels as of the September jobs report, it is not too concerning to see the pace of job growth slow,” Clark said in a note to her clients. “A backdrop of a tight labour market will be the key factor to watch over the coming months to support our expectation of an April 2022 rate hike by the Bank of Canada.”

• Email: kcarmichael@postmedia.com | Twitter: CarmichaelKevin

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