OTTAWA –
The Canadian economy lost 43,000 jobs in June, marking the first decline in employment since January.
At the same time, the unemployment rate fell to a new record low of 4.9 per cent, according to Statistics Canada’s latest labor force survey on Friday.
The jobless rate in May was 5.1 percent, the lowest since at least 1976, which is far from comparable figures.
“The labor market still looks very strong after looking at some of the monthly noise,” Bank of Montreal senior economist Robert Kavcic said in an email.
Looking ahead, Kavcic said BMO expects “a significant slowdown in the economy later this year.”
Canada’s central bank is expected to raise its key interest rate on Wednesday, with most economists forecasting a three-quarters of a percentage point increase.
A recent study by the Canadian Center for Policy Alternatives warned that a rapid rise in interest rates would likely send the Canadian economy into recession and could cause significant “collateral damage,” including the loss of 850,000 jobs.
For now, however, CIBC chief economist Avery Schoenfeld said the Bank of Canada would not be dissuaded from raising interest rates more aggressively, noting a 1.3 percent increase in hours worked and a decline in jobs offset by lower participation of the workforce.
“By itself, the underlying decline in jobs is not yet compelling evidence of a slowdown that would keep the Bank of Canada from hiking 75 basis points next week,” Schoenfeld said in an email.
The fall in the unemployment rate in June was due to fewer people looking for work, Statistics Canada said, while the job loss was due to a 59,000-job drop in self-employment.
For business owners, the decline in the labor force participation rate only adds to their labor shortage problems.
Mark Kitching, owner of Waldo’s on King bistro and wine bar in London, Ontario, says hiring challenges continue. He says he could hire two or three extra kitchen staff, but he can’t find any takers.
“I’ve talked to people in my industry and we all have the same problem,” Kitching said.
Vacancies in Waldo’s mid-level staff have to work overtime, which Kitching says makes the job more expensive and stressful.
June also saw a faster pace of wage growth, with average hourly wages rising 5.2% year over year to $31.24.
Kavcic said previous data on wage growth was lagging and did not reflect “reality on the ground”.
“These numbers now better reflect conditions in the real economy,” he said.
Compared to pre-pandemic wage growth, June saw the fastest increase since comparable data were collected in 1998. However, June wage growth was still below the last inflation rate of 7.7 percent reported in May .
Wage growth was led by gains among non-union workers, whose wages rose 6.1 percent, while union workers had a slower wage increase of 3.7 percent.
Employment in the public and private sectors remained stable.
Services sector jobs fell by 76,000, erasing gains made earlier in the year. The biggest drop in employment was in retail trade. The report said data for the next few months may help answer whether the decline is due to a change in consumer behavior as inflation remains high.
Employment in the good manufacturing sector rebounded with 33,000 jobs added.
This report by The Canadian Press was first published on July 8, 2022.
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