Canada’s jobless rate experienced a second consecutive monthly increase in June, despite a rebound in hiring. This suggests that there may be room for another interest rate hike as early as next week.
In June, employment in Canada saw a larger-than-expected rise, marking the largest increase since January. The growth was primarily driven by full-time work and is reflective of the country’s expanding labor force. However, central bank officials may find some solace in the cooling wage growth.
According to Statistics Canada’s report on Friday, the number of employed working-aged individuals in Canada increased by 59,900 in June. As a result, the unemployment rate rose by 0.2 percentage points to 5.4%. This is the highest rate seen since February of the previous year. Economists at TD Securities had predicted a gain of 20,000 jobs and an unemployment rate of 5.3%.
In May, employment had declined by 17,300 jobs, with losses primarily affecting the youth demographic. This followed a period of robust hiring since September of the previous year, which had kept the jobless rate just above the record low of 4.9% seen in June and July.
When calculated using the methodology of the U.S. Labor Department, Canada’s unemployment rate in June rose by 0.2 percentage points to 4.4%.
Canada’s Resilient Economy Despite Mixed Indicators
Recent indicators have presented a somewhat mixed outlook for Canada’s economy. However, this hasn’t shaken the prevailing view that it remains relatively resilient. Despite expectations of subdued growth over a year into the Bank of Canada’s campaign of raising interest rates to dampen inflation, the overall economic picture remains stable.
Decision on Interest Rates
Bank officials are scheduled to meet on Wednesday to decide on interest rates. Last month, they had already increased the policy rate by a quarter percentage point to a 22-year high of 4.75%. This decision came after a brief pause in tightening policies due to strong consumer spending in the first quarter. Furthermore, concerns over potential inflationary pressures played a significant role in this move, as there were worries that inflation could persist above the 2% target.
Industry-Level Performance and Inflation
In April, industry-level gross domestic product showed little change. However, early indicators from Statistics Canada suggest solid growth of 0.4% month-on-month in May. Additionally, annual inflation in May diminished to 3.4%, marking the slowest pace since mid-2021, despite persistent high food prices.
Housing Market Recovery Fueling Expectations
The housing market has experienced a notable recovery in recent months. This has fueled expectations among certain economists that the central bank may consider implementing back-to-back rate increases.
Employment Rate
Although there has been an increase in employment over the past two months, the rate still remains below the pre-Covid-19 pandemic average of 5.7%. This indicates that there is still progress to be made in recovering the labor market to its pre-pandemic levels.
Canada’s economy showcases resilience in the face of mixed indicators. The Bank of Canada’s ongoing efforts to address inflation through interest rate adjustments have contributed to this stability. As decision-makers convene to discuss rates, anticipation looms regarding how the future will unfold for Canada’s economy.
Average Hourly Wage Growth Eases in June
The Bank of Canada has been closely monitoring the average hourly wage growth as an indication of potential inflationary pressures. In June, this growth rate eased to 4.2%, after consistently exceeding 5% for the past five months.
Improvement in Employment and Labor-Force Participation Rate
Despite the easing wage growth, there were positive developments in the labor market. Employment levels increased, and the unemployment rate was slightly higher in June compared to the previous month. As a result, the labor-force participation rate, which measures the proportion of the working-age population that is either employed or unemployed, saw a 0.2 percentage point increase to reach 65.7%.
Focus on Full-Time Employment and Reduction in Part-Time Jobs
The jobs report for June revealed that all the jobs added during that month were in the full-time employment category, with a significant increase of 109,600. This growth in full-time employment nearly matched the overall monthly increase of 114,000 in Canada’s labor force. Conversely, there was a decline of 49,800 part-time jobs.
Employment Trends Across Different Categories
Statistics Canada reported a 0.5% month-on-month increase in employment among core-aged men (between 25 and 54 years old), resulting in a cumulative gain of 92,000 jobs since March. However, there was little change in employment among core-aged women. Noteworthy sectors that experienced employment growth included wholesale and retail trade, healthcare and social assistance, as well as manufacturing and transportation and warehousing.
Steady Total Hours Worked
Although total hours worked remained unchanged from the previous month in June, there was still a 2.0% increase compared to the same period last year.
Changes in Self-Employment and Private/Public Sector Employees
According to the report, the number of self-employed individuals decreased by 0.7% in June. On the other hand, there was a 0.6% rise in the number of private-sector employees compared to May. The number of public-sector workers saw a slight decline of 0.1%, as reported by the agency.
It is evident from the latest jobs report that there have been notable developments in the Canadian labor market. While average hourly wage growth has eased, the increased employment levels and a rise in full-time jobs indicate positive signs. Industries such as wholesale and retail trade, healthcare and social assistance, and manufacturing and transportation and warehousing have been at the forefront of employment growth.
