Highlights:
- Employment fell 52k in August to retrace most of a 54k increase in July. Sectors of strength in July (like education hiring) were generally not areas of weakness in August.
- The unemployment rate ticked up to 6.0% from the 5.8% in July that matched a more-than 4-decade low.
- Wage growth for permanent workers slowed to 2.6% from 3.0% in July.
Our Take:
There was not a lot to like in the Canadian August labour market report. One month also does not make a trend, though, particularly in the notoriously volatile LFS data. Employment dropped 52k to retrace most of a 54k July surge. Job growth has still averaged 14k per month over the last 12 months, though, with full-time job growth running almost twice as strong over that period at an average 27k per month. The unemployment rate ticked up to 6.0%. That is still only slightly above the 5.8% in July that matched a more-than 4-decade low and is still down from 0.2% from a year ago. Wage growth was perhaps the most surprising measure in today’s report, with year-over-year growth in average hourly earnings slowing to 2.6% from 3.0% in July and almost 4% in May. Even with the deterioration in jobs and the unemployment rate in August, labour markets look tight enough that wages should be growing more quickly. Wage growth has also increasingly been concentrated in B.C. and Ontario. That makes sense given labour markets have generally been stronger than average in those regions — but both have also had significant boosts to the minimum wage over the last year.
There is mounting evidence that the pace of improvement in labour markets is slowing, even looking through volatility. That is less concerning, though, with unemployment already probably pretty close to its ‘full-employment’ level. More wage growth would provide the last missing element that labour markets have indeed moved to capacity. There likely won’t be a lot for the Bank of Canada to like in today’s data — but the numbers are volatile enough that one month also shouldn’t make a big difference in their near-term assessment of the strength of the economy. Today’s data shouldn’t have much of an impact on the odds of another 25 basis point hike to the overnight rate in October.
