The Canadian labour market gained 40k positions in May, with full-time employment up 135k and part-time employment down 96k.
The unemployment rate dropped by 0.1 percentage points, to 5.1%. The participation rate was unchanged at 65.3%.
By industry, employment in the services producing sector rose 81k, “with gains spread across several industries, including accommodation and food services.” Meanwhile, employment in the goods-producing sector dropped by 41k, “mostly due to a decline in manufacturing.”
On a geographic basis, the report noted employment gains in Alberta (+28k), Newfoundland and Labrador (+4.1k), and Prince Edward Island (+1.1k), while New Brunswick (-3.9k) was the one province seeing a drop. Employment in Ontario and Quebec held steady over the month.
Lastly, total hours worked declined 0.3% month-on-month and wages were up 3.9% year-on-year (versus 3.3% last month).
Key Implications
It was a nice bounce-back for Canadian employment in May. Following April’s Omicron-induced slowdown in job gains (recall nearly 10% of workers were absent due to illness), there has been a noticeable return to more normal life for Canadians. As we commence the ritual of filling patios and hit the road for overdue vacations, employers continue to search for workers to meet heighten demand. This has job vacancy rates at record levels, making it clear that the Canadian economy is operating beyond full employment.
With more people employed and wage growth climbing, the strength in domestic demand will be sufficient to keep inflation as a thorn in the side of the Bank of Canada. Just yesterday, Governor Macklem stated his openness to speeding up the rate hike cycle given the overheating economy. Today’s jobs report will only continue to fuel speculation of even higher interest rates. This has short-term Canadian bond yields moving higher this morning, with most yield tenors comfortably above 3%.
