📝 Pace Of Job Gains Remain Above What's Needed to Open Up Slack: CIBC

The household survey recorded a 204K increase in jobs, and combined with a modest retrenchment in the labor force participation rate, that left the unemployment rate two ticks lower at 3.5% (vs. 3.7% expected).

The hiring in the leisure and hospitality sector still leaves employers in that industry 1.2mn employees short relative to pre-pandemic levels, as many workers switched industries during the pandemic. The labor shortage in the industry is being amplified by the rotation in demand towards services and away from goods.

While the deceleration in hiring is a welcome sign for the Fed, the pace of job gains remains above what's needed to open up slack in the labor market, and the Fed will remain on track to conduct further outsized hikes over the rest of the year as a result. The growth in aggregate hours worked over Q3 (2.4% annualized) suggests that GDP growth around the 2% mark is attainable, even with softness in goods-producing sectors of the economy.

In Canada: The low unemployment rate and still strong wage growth support the continued hawkish tone from the Bank of Canada Governor yesterday and a 50bp rate hike at the next meeting. However, signs that a growing number of sectors are slowing down should bring a more cautious approach from policymakers after that. The moderate decline in hours worked suggests that monthly GDP will fail to break out of its recent sideways trend, and that September will once again post little to no growth.

- CIBC