Statistics Canada is set to release its June jobs report on Friday, following a surprising gain of 27,000 positions in May that defied economist expectations of a decline. The May unemployment rate held steady at 6.2%, but analysts anticipate a slowdown in June as high interest rates and a cooling economy weigh on hiring.
May Surprise Raises Questions
In May, employment rose by 27,000, driven by gains in health care, construction, and transportation. This contradicted forecasts of a 20,000-job loss, according to a Bloomberg survey. However, full-time employment fell by 35,000, while part-time work increased by 62,000, suggesting a shift toward less secure positions. Average hourly wage growth accelerated to 5.1% year-over-year, up from 4.7% in April, potentially complicating the Bank of Canada's inflation fight.
Economists Predict June Pullback
For June, economists polled by Bloomberg expect a modest gain of 15,000 jobs, with the unemployment rate rising to 6.3%. CIBC Capital Markets expects a 10,000-job increase, while RBC forecasts a 20,000 gain. “The labour market is losing momentum,” said RBC economist Nathan Janzen. “We expect job growth to slow further as higher interest rates dampen demand.” The Bank of Canada has raised its key rate to 4.75%, the highest since 2001, to curb inflation, which remains above the 2% target at 3.4%.
Regional and Sectoral Variations
May gains were concentrated in Ontario and Quebec, while Alberta and British Columbia saw declines. The goods-producing sector added 25,000 jobs, while services were flat. Construction employment rose by 15,000, and health care added 12,000. The public sector saw a 46,000-job increase, offsetting a 19,000 drop in private sector employment. Self-employment fell by 33,000.
Impact on Monetary Policy
The June data will be closely watched by the Bank of Canada ahead of its July 12 decision. A strong report could prompt another rate hike, while a weak one may lead to a pause. “The Bank of Canada will be looking for signs of slack in the labour market,” said TD Bank economist James Orlando. “If wage growth remains elevated, they may need to tighten further.” The Canadian dollar weakened ahead of the release, trading at 75.4 US cents.
Longer-Term Trends
Despite recent gains, employment is still 1.2% below pre-pandemic levels. The participation rate fell to 65.3% in May, near a two-year low, as more workers left the labour force. Youth unemployment rose to 11.4%, while core-age (25-54) unemployment held at 5.0%. The number of long-term unemployed (27+ weeks) increased by 6,000 to 145,000.
