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Fundamental Analysis

Canadian Employment Gains Modestly in July


Canada added 10.9k net jobs in July. The unemployment rate ticked down to 6.3% (from 6.5%), a level last seen in 2008, as fewer Canadians were engaged in the labour market.

July marked a third straight month of full time job gains (+35.1k), while part-time work pulled back slightly (-24.3k). Gains were entirely among self-employed individuals (+13.2k), as 2.4k net employees were shed. Both public (+0.8k) and private sector (-3.2k) employment were largely unchanged.

Large swings were observed across industries. Among goods producers (+1.9k), agriculture (-10.0k) and construction (-9.1k) saw declines, while manufacturing (+13.7k) and natural resources (+8.0k) were up. On the services side (+9.0k), trade (+21.9k) and information (18.3k) were among the gainers, while educational services (-32.0k) and public administration (-10.3k) saw notable declines.

Regionally, it was Ontario that led the gain, adding 25.5k net positions, while Alberta (-14.4k) saw the largest pull-back in employment.

Hours worked were encouraging, up 1.9% year-on-year, the strongest gain in nearly 2 years. Growth in the hourly wage rate ticked up slightly, to 1.2% year-on-year.

Key Implications

Canada notched up an eighth straight month of job gains, but the details of the report were somewhat mixed. Notably, job gains were entirely attributable to self-employment, and although hourly wage growth ticked up again, it remains stubbornly weak. Even the drop in the unemployment rate was led by fewer Canadians looking for work, although some solace can be taken in that the decline appeared to be led by younger and older individuals, as 'core' working age participation remained solid.

On the plus side, the healthy gain in hours worked is encouraging, particularly in light of the weak gains that have characterized 2017 to date.

The Bank of Canada has clearly signaled a desire to further increase its monetary policy rate from its current, emergency level, and today's data will provide more justification to do so. We remain of the view that a further 25bp hike is likely at their October meeting, with a more gradual pace of hikes expected thereafter.

Author: TD Bank Financial Group Website:
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
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