The Canadian labour market shed 43k positions in June. Of some (cold) comfort was the fact that nearly all of the losses (39.1k) were in part-time positions, with full-time employment down a more modest 4k positions.
Self-employment was down 59.2k positions, private sector hiring was up 16.6k, and public sector employment was little changed in June.
Even with the headline drop in employment, the unemployment rate fell 0.2 ppts to 4.9%, as the labour force declined by 97.5k and the participation rate slid from 65.3% to 64.9%. Tight markets are prompting accelerating wage growth, with average hourly earnings up 5.2% year-on-year versus 3.9% in May.
By industry, job losses were concentrated in the services sector, where employment fell by 76k. Losses were spread across several industries, with the largest decline occurring in retail trade (-58k). However, there were also losses in healthcare and social assistance (-20k), educational services (-14k), and information, culture and recreation (-14k). In contrast, employment in the goods producing sector was up 33k in June, lifted by manufacturing (+26k) and construction (+23k).
On a geographic basis, the report noted job losses in Quebec (-27k) and Newfoundland and Labrador (-4.3k), while being little changed in Ontario. On the flipside, employment increase in Manitoba (+4k) and PEI (+1.6k).
Lastly, total hours worked increased 1.3% month-on-month.
Key Implications
June’s soft employment print (coupled with last week’s flash estimate for a decline in GDP during May), signals that Canadian economic momentum is softening. This is consistent with our view that growth will ease in the second half of this year. That said, details of the report were more encouraging, as hours worked climbed significantly during the month. In addition, the unemployment rate fell to a new low of 4.9%. A very tight job market is prompting stronger wage growth, which will go some way towards offsetting the erosion in real incomes by inflation.
For the Bank of Canada, today’s report (which featured a weak headline, but better details) is unlikely to sway their aggressive stance, particularly with job markets so tight and wages accelerating rapidly. Policymakers are resolute in their determination to rein in inflation and prevent expectations from becoming further unanchored. As such, we still expect them to hike by 75 bps at their next policy meeting on July 13th.
