Posted Aug 7, 2022 at 8:00 am EDT
Canada’s unemployment rate held steady at 4.9% in July, matching the previous month’s record low.
The total number of unemployed remained at one million in July. In addition, 426,000 people wanted work but did not seek it and therefore did not meet the definition of unemployed. This was unchanged for almost the sixth month in a row. The adjusted unemployment rate, which takes into account this source of potential labor supply, remained at 6.8%, the lowest level since comparable data first became available in 1997.
In addition, employment in Canada fell by 31,000 jobs, which Statistics Canada said was no significant change. Canada lost about 74,000 jobs from May to July, but from May 2021 to May 2022 employment increased by more than one million.
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That being said, July marked the second consecutive month of declining employment in Canada. Also, record low unemployment combined with more than one million job vacancies means Canada still faces a tight labor market.
“Two consecutive months of lower employment suggest the Canadian labor market is facing capacity constraints, with little room for upward movement,” RBC economist Carrie Freestone wrote in an economic update. “Demand for workers is still very high, with job postings still 65% above pre-pandemic levels (although the number of job postings continues to decline) and there are few unemployed Canadians to fill those open positions.”
Employment among public sector workers fell by 51,000 (1.2%) in July, the sector’s first decline in 12 months. The decline is largely concentrated in Ontario and Quebec. Despite falling on a monthly basis, public sector employment rose by 5.3% (+215,000) compared to July 2021.
The number of self-employed workers increased by 34,000 (+1.3%) in July after falling by 59,000 (-2.2%) in June. Despite this increase, self-employment remained unchanged year-on-year and was 214,000 (-7.4%) below its pre-pandemic level in February 2020.
Employment fell by 53,000 (-0.3%) in the services sector in July. The biggest contributor to losses in this sector is wholesale and retail trade. The number of people working in wholesale and retail trade fell by 27,000 (-0.9%) in July, the second consecutive monthly decline. Most of the net decrease was in Ontario and Quebec.
“Job losses were oddly concentrated in the services sector, including wholesale and retail trade, education and healthcare,” CIBC’s Andrew Grantham told Reuters. “With some of these sectors reporting high levels of vacancies; labor supply, not demand, seems to be the main problem. However, the main difference between today’s report and last month’s is that wage growth unexpectedly slowed.
Average hourly wages for employees rose 5.2% (+$1.55 to $31.14) year-over-year in July, roughly the same rate of year-over-year increase seen in June (+5.2%) ; +$1.54). For the second month in a row, average hourly wages rose at similar rates among part-time (+5.0%; +$1.05) and full-time employees (+4.9%; +$1.52). Earlier in 2022, wage growth was faster among full-time employees compared to part-time workers.
The latest inflation data showed the consumer price index rose 8.1% year-on-year in June, the biggest annual change in nearly 40 years.
“Rising costs of living are raising the temperature at the collective bargaining table,” economist Liam Daly wrote in a Conference Board of Canada media release. “Given the level of inflation, unions argue that typical annual wage increases are simply insufficient. Against a backdrop of high vacancy rates and low unemployment rates, workers are negotiating from a stronger position.”
Doug Porter, an economist at BMO, said in a statement to Reuters that the bottom line is that the labor market is still very tight.
“We’re still dealing with the lowest unemployment rate in at least 50 years and high wages,” Porter said. “But from a growth perspective, the reality is that employers are having trouble finding workers, and that’s limiting the growth of the economy.”
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