Canadian Labour Markets Back on Track in June

Fundamental analysis of Forex market

June saw 31.8k net jobs added to the Canadian economy. The unemployment rate rose to 6.0% as a surge of Canadians joined the labour force.

However, the details were somewhat mixed. Part-time employment led the rise (+22.7k), but full-time work still added about a third of the total (+9.1k). By type, the public sector led the way (+11.8k) as private employment was effectively flat (-2.0k). A gain of 22k in self-employment brought the overall tally to 31.8k.

Employment in the goods-producing sector recovered in June, with 46.6k net jobs added. Particular strength could be seen in construction (+27.2k) and manufacturing (+11.3k). Conversely, the service side of the economy saw a four-month streak of gains broken as net employment fell 14.7k. Driving the drop were declines in trade (-14.0k) and accommodation and food services (-15.9k).

– advertisement –

It was Ontario that drove the national gain, adding 34.9k positions. Ontario’s labour force also led the way higher, adding 56.2k net positions and resulting in a 0.2p.p. increase in the unemployment rate, to 5.9%. Developments elsewhere were more modest by comparison.

Total hours worked dropped slightly in June (-0.2% m/m), which together with a healthy result last year resulted in just a 1.4% year-on-year gain. Wage growth also moderated, to 3.5% y/y for permanent employees (3.6% for all employment types).

Looking beyond the month-to-month volatility, year on year job gains continued to gradually decelerate from the robust pace of 2017, down to 1.2% in June. The trend (6mma) measure ticked into negative territory, at -2.8k.

Key Implications

Not too shabby. Canada managed to shake off the past few months of declines, and this was one of those reports where a rising unemployment rate isn’t a bad thing as it was driven by more Canadians engaging with the labour force. The employment mix could have been a bit healthier, but it certainly could have been worse too.

Perhaps most importantly, the upward trend in wages remains unbroken. The year-on-year pace may have fallen a tick, but the trend is clear. Wage gains have averaged 3.5% so far this year, a significant acceleration from the 2.2% pace over the latter half of 2017. June also marked the fourth straight month where more than half of the major industries saw wages rising above a 3% pace.

This is it. The jobs figures and (so-so) trade data this morning are the last major data points ahead of the Bank of Canada rate decision Wednesday. If the relative softness of prior months’ jobs figures were not enough to move Governor Poloz and company off a July hike, there is nothing in this latest data likely to do the trick. We continue to look for a policy interest rate hike on July 11th.