- The Canadian labour market lost 68k jobs in May. This was below consensus expectations for -22.5k and left the level of employment 3.0% below its pre-pandemic February 2020 level. May’s losses were concentrated in part-time employment, which shed 54k, while full-time fell 14k last month.
- Like employment, Canada’s labour force shrank in May, declining by 56k, as the labor force participation rate fell to 64.6% from 64.9% in April. Given that both employment and labour force saw similar declines, the unemployment rate did not change much, edging up 0.1 percentage points to 8.2%.
- By industry, job losses were mainly in goods-producing industries (-46k). Sizeable losses were seen in manufacturing (-36k) and construction (-16k) as public health restrictions impacted activity in both areas of the economy. The services sector (-22k) also lost jobs in May due to ongoing restrictions weighing on employment in retail trade (-29k) and other services (-24k). Declines were partly offset by increases in transportation and warehousing (+22k) and natural resources (+9k)
- On a provincial basis, job losses were mainly in Ontario (-32k) and Nova Scotia (-22k) as both provinces had strict public health measures during the survey period. Saskatchewan was the only province to see a meaningful increase in employment in May (+4k).
- Lastly, after declining in April, total hours worked was little changed in May (+0.1% m/m).
Key Implications
- Make that two in a row. The Canadian labour market lost jobs for the second month straight as public health measures enacted to fend off the third wave of the pandemic continued to weigh on employment conditions. While losses were not as large as what we saw in April, the hole to climb out of is now deeper.
- Peering ahead, employment gains are set to accelerate in the coming months. Provinces have began to reopen their economies, and we are likely to see dynamics similar to when governments relaxed restrictions after the second wave of the pandemic. Except this time the acceleration in the vaccine rollout may provide employers with added confidence, thereby boosting hiring intentions.
- That said, the drop in this month’s participation rate is concerning. With fewer people engaged in the labour market, Canada could face labour shortages as demand for labour recovers faster than supply. This will be an area to watch closely in the coming months.
