Highlights:
- Employment jumped a much-stronger-than-expected 55k in May. Markets expected a 15k gain.
- Full-time employment was up 77k to more-than-offset a 22k drop in part-time.
- The unemployment rate inched up to 6.6% from 6.5% in April as labour force participation rose.
- Year-over-year wage growth for permanent employees remained modest but rose to 1.0% from the all-time low 0.5% in April
Our Take:
The jump in employment in May continued an unusually long streak of gains for a survey that is typically very volatile. The 55k surge in employment marked the 16th gain out of the last 18 months. Average growth over that period has been 21k. The unemployment rate ticked up to 6.6% from the cycle-low 6.5% in April but because of a jump in the labour force. The measure was still down 0.3 percentage points from a year ago and there is little evidence that factors like worker discouragement or involuntary part-time employment have been behind recent declines. The labour force participation rate is close to all-time highs when controlling for the aging of the population.
Wages remain the soft-spot although annual growth in permanent employee wages rose to 1.0% from the all-time low 0.5% increase in April. Other wage measures have, though, been somewhat stronger. Compensation-per-hour worked was up 2.5% year-over-year in the first quarter and wage growth in the alternative ‘SEPH’ labour force survey for Canada was 2.4% year-over-year in March.
Strengthening in labour markets and stronger recent GDP growth numbers increasingly argue that current ultra-low interest rates may no longer be needed to support the economy. We nonetheless, continue to expect slow wage growth, lack of upward pressure in consumer prices, and uncertainty about U.S. trade policy during the upcoming NAFTA renegotiation will keep the Bank of Canada cautious and don’t expect a rate hike until the first half of 2018.
