Canada's job market comes roaring back to pre-pandemic level in September

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A "Help Wanted" sign in the window advertises a job opening at a dry cleaners (REUTERS)

Canada's job market is back to where it was before the pandemic.

Statistics Canada says employment returned to its February 2020 level in September, up by 157,000 jobs.

The jump is more than double the estimates of a 60,000 gain. Gains were widespread, led by the service sector.

The unemployment rate fell to 6.9 per cent, the lowest since the start of the pandemic.

But that doesn't mean the job market is fully healed. Canada's population has grown and the number of people working less than half their usual hours is 218,000 higher than in February 2020.

Stephen Brown, senior Canada economist at Capital Economics, says while the number is strong, a seasonal quirk explains 50,000 of those jobs. He expected a gain of 120,000.

"Our forecast was the highest of those collected for the Reuters survey, which seems to be because other forecasters missed the fact that, because there were fewer seasonal workers hired than usual over the summer, there were also fewer seasonal workers coming to an end of their employment contracts in September," said Brown.

"That had the effect of boosting the seasonally adjusted month-over-month change in employment."

Brown says because the unemployment rate is still above the pre-pandemic level of 5.6 per cent, he doesn't expect the Bank of Canada to suddenly turn hawkish.

Long-term employment mystery

Leah Nord, the Canadian Chamber of Commerce's senior director of workforce strategies and inclusive growth, says better data on what's holding people from rejoining the workforce is needed for a full economic recovery.

"Our long-term unemployment numbers are still nearly double what they were pre-pandemic. That means that, in the midst of a mass labour shortage, 27.3% of unemployed Canadians are unaccounted for. Where did they go?," said Nord.

"We can speculate all day, but the fact is, we currently have no data to tell us why nearly 400,000 Canadians haven't been able to rejoin the workforce after 27 weeks or more."

Loonie jumps

Meanwhile, the U.S. jobs numbers missed estimates by a wide margin, adding 194,000 jobs versus an expected 500,000. The divergence between Canadian and U.S. jobs growth helped push the loonie higher.

"Driven by a convergence in employment levels, the Canadian dollar exchange rate broke through a key psychological barrier, rising 40 basis points from pre-release levels," said Karl Schamotta, chief market strategist at Cambridge Global Payments.

"Expectations for an additional reduction in asset purchases at the Bank of Canada's November meeting have been bolstered."

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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