Weak end to 2023
The first bits of economic data have been coming in for December and the numbers show continued weakness in economic activity along with sticky inflation that suggests a discouraging bookend to 2023.
Employment data that were released by Statistics Canada on Jan. 5 showed the labour market continues to stagnate, producing no net new jobs in December.
Overall for 2023, the Canadian employment increased by 430,000 – one of the biggest annual gains ever. But those gains slowed sharply in the final three months, when employment increased by just 43,000 – consistent with other evidence that the economy has stalled in the final half of 2023.
Unemployment also shot up during the year - to 5.8 percent from five per cent at the end of 2022 - despite the increase in employment. That’s one of the biggest increases in the jobless rate on record, and usually associated with recessions.
Economists at RBC have produced a smart analysis showing that students and young graduates are bearing a disproportionate share of the rising unemployment rate.
Inflation numbers for December, meanwhile, were disappointingly hot, with the headline year-over-year rate rising to 3.4 per cent last month. More importantly, underlying inflation pressures are on the rise again, which is prompting investors to reconsider the prospect of a rate cut by the Bank of Canada any time soon.
One bit of good news comes from the housing market, with Canadian Real Estate Association data showing a strong rebound in home sales activity in December.
