- A net 27.7k more Canadians were at work in May. As modest as the headline gain was, a drop in the participation rate – after solid increases so far this year – was enough to pull down the unemployment rate to 5.4% – the lowest its been since at least 1976.
- The composition was a bit mixed. The gains were entirely full-time, but both the public and private sector shed jobs (-13.1k and -20.7k respectively), leaving a 61.5k rise in self-employment the driver of job growth.
- The service sector led the way (+22.8k), helped by gains in health care, professional services, and transportation. Goods-producers added 4.9k on generally modest performances from the main sub-sectors.
- Among the provinces, performances were generally modest. Rises in Ontario (+20.9k) and B.C. (+16.8k) were partly offset by generally modest performances elsewhere and a small decline in Quebec (-11.6k on net).
- Coming in a bit ahead of expectations, wage gains for permanent employees held steady at 2.6% year-on-year. Total hours worked fell for the fourth time in six months, down 0.3%.
Key Implications
- Meh. Looking past the new record low in the unemployment rate, this report was a bit on the soft side. All of the job gains (and then some) are down to self-employment, and the drop in the unemployment rate was driven by fewer Canadians engaging with labour markets, notably among the under-55 population. The only real bright spot was wages, which held up nicely despite some unfavourable base effects (i.e. strong gains this time last year).
- Still, we wouldn’t get too hung up on this report. Some sort of pause/slowdown was to be expected eventually given the recent strength in hiring that has not been matched elsewhere in the economic data. We hope for a better composition, but today’s report is consistent with our view of a more moderate pace of hiring going forward.
- For the Bank of Canada, today’s report will serve to reinforce their cautious approach. Recent communication attributed weakness in hours worked to caution among employers. That caution clearly remains, and with trade uncertainty elevated, expect the Bank of Canada to stay on the sidelines for some time.
