Canada's labor market showed signs of resilience in September, with strong employment growth supporting expectations of an interest rate cut by the Bank of Canada (BoC) later this month, according to Bank of America analysts.
Net employment increased by 46,700 jobs, surpassing expectations, driven by a robust gain in full-time positions (+112,000).
This marks the largest rise in full-time employment so far this year, while part-time jobs fell by 65,300.
The unemployment rate edged down to 6.5%, the first decline since January, further highlighting the strength of the labor market.
"The rebound in full-time employment signals a recovery in economic conditions, potentially driven by lower interest rates," Bank of America analysts wrote in their latest note. They also pointed out that the services sector, particularly wholesale and retail trade, led job creation, with the industry adding 50,200 positions overall.
Wage growth slowed to 4.5% year-over-year, down from 4.9% in the previous month, which the analysts expect to continue easing in the coming months.
Bank of America sees the labor data as supportive of a 25 basis-point rate cut by the BoC at its October 23 meeting.
"We expect the BoC to cut 25bp at every meeting through April, leaving the rate at 3.75% by the end of 2024," the analysts noted.
However, they cautioned that a more significant 50 basis-point cut could still be on the table if economic activity weakens significantly.