Canada’s labor market bounced back in June, more than offsetting losses from a month earlier, keeping pressure on the Bank of Canada to raise interest rates again next week.
(Bloomberg) — Canada’s labor market bounced back in June, more than offsetting losses from a month earlier, keeping pressure on the Bank of Canada to raise interest rates again next week.
The country added 60,000 jobs, driven by gains in full-time work, while the unemployment rate rose to 5.4%, the highest since February 2022, Statistics Canada reported Friday in Ottawa. The figures beat expectations for a gain of 20,000 positions, but missed the forecast for a jobless rate of 5.2%, according to the median estimate in a Bloomberg survey.
June’s data show the loss of 17,300 positions in May was a temporary setback, although the increases last month were accompanied by slower wage gains of 3.9%, the weakest in a year. With the economy still churning out jobs despite 450 basis points of rate hikes, the central bank is likely to remain on its tightening path.
The loonie rose as high as C$1.3319 per US dollar after the data release, which came at the same time as a report that showed US employers added fewer jobs in June than expected.
A string of strong economic data prompted Bank of Canada Governor Tiff Macklem and his officials to end a rate pause last month and raise the overnight lending rate to 4.75%.
“I think this does really justify that rate move and justifies another one coming next week,” Dawn Desjardins, chief economist at Deloitte in Canada, said on BNN Bloomberg Television.
Canada’s unemployment rate rose 0.2 percentage points, following a similar increase in May, as growth in the population and labor force outpaced employment and as more youth were looking for work.
The population grew 0.3% and the labor force rose 0.5%, while employment increased 0.3%. The participation rate increased 0.2 percentage points to 65.7%.
“Despite the strong headline gain in employment there are further signs of a loosening in labor market conditions within today’s job figures, albeit maybe not enough to prevent the Bank of Canada pulling the trigger on another interest rate hike as early as next week,” said Andrew Grantham, an economist with Canadian Imperial Bank of Commerce, in a report to investors.
Headline inflation has, however, slowed sharply to 3.4% in May from its peak of 8.1% last year. Before the release of the jobs report, economists were split on whether the central bank will hike in July or September.
Before May’s setback, the country had the longest run of job creation since 2017 during which 423,900 positions were created.
In June, total hours worked rose 0.1% on a monthly basis and were up 2% compared to a year earlier. That points to relatively firm economic momentum at the end of the second quarter.
Job gains were led by increases in wholesale and retail trade, manufacturing and healthcare and social assistance.
Employment rose in Ontario, Nova Scotia, and Newfoundland and Labrador, while it fell in Prince Edward Island and was little changed in other provinces.
–With assistance from Erik Hertzberg and Sandra Mergulhao.
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