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OTTAWA - Canada's economy added almost three times the number of jobs expected in August and wage growth accelerated, data showed on Friday, a sign of underlying strength despite high interest rates.
Canada created 39,900 jobs, Statistics Canada said, compared with a median forecast for a gain of 15,000. The unemployment rate remained at 5.5%.
Full-time positions grew by 32,200 while part-time jobs posted a more modest gain of 7,800.
The labor market has been resilient even as the Bank of Canada (BoC) raised its key overnight rate 10 times since March 2022 to cool the economy. Monthly employment growth is averaging 25,000 so far this year.
The average hourly wage for permanent employees, a figure the central bank watches closely, rose by 5.2% from August 2022 compared to a year-on-year increase of 5.0% in July.
The BoC has repeatedly expressed concern that it will be hard to fully curb inflation if wages maintain their current patterns of rising between 4% and 5% annually.
"Showing that uptick on a year-over-year basis was not anticipated and I think that will not give the Bank of Canada a great degree of comfort," said Andrew Kelvin, chief Canada strategist at TD Securities.
The central bank stayed on the sidelines on Wednesday but said on Thursday it might have to tighten monetary policy further. It had hiked rates by a quarter of a percentage point in both June and July.
Money markets see a 44% chance of another BoC rate hike by year-end, up from 36% before the data were published.
"The Canadian labor market bounced back in a big way in August," said Royce Mendes, head of macro strategy at Desjardins Group. "This report alone won't make the Bank of Canada regret holding rates steady earlier this week. However, it does highlight that the economy hasn't completely stalled."
The Canadian dollar was trading 0.4% higher at 1.3628 to the greenback, or 73.38 U.S. cents.
Canada's gross domestic product unexpectedly shrank an annualized 0.2% in the second quarter, a sign the economy could have already entered a recession as higher rates sink in.
BoC Governor Tiff Macklem on Thursday said he did not think the economy had entered a recession.
The bank's next rate announcement is due on Oct. 25.
Employment in the goods sector fell by a net 2,500 jobs in August, largely in manufacturing, while the services sector gained a net 42,400 jobs, mostly in professional, scientific and technical services.
Derek Holt, vice president of capital markets economics at Scotiabank, noted a gain of 49,500 people in self-employed jobs.
"That's the softest of the soft data that you treat with skepticism ... it's tough to cut through to the evidence and see what's really going on," he said.
(Additional reporting by Dale Smith in Ottawa and Fergal Smith in Toronto; Editing by Andrea Ricci and Nick Macfie)