The Canadian economy registered its first monthly job loss since the start of the year in June, but the labor market remained exceptionally tight as unemployment fell again and wages rose.
In its labor force survey released Friday, Statistics Canada said the country lost 43,000 jobs last month, but the unemployment rate fell to 4.9 percent, the lowest level since comparable data began in 1976, and compared to 5.1 percent in May.
The drop in the unemployment rate in June was attributed to fewer people looking for work, Statistics Canada said, while the job loss was driven by a 59,000 job drop in the self-employed.
Lack of workers
For entrepreneurs, the fall in the labor participation rate caused even more misery on the labor market.
Mark Kitching, owner of Waldo’s on King bistro and wine bar in London, Ontario, said he could hire two or three additional kitchen staff, but won’t be getting any candidates.
“I’ve talked to people in my industry and we all have the same problem,” Kitching said.
The vacancies at Waldo’s have forced employees to work overtime, which, according to Kitching, makes work more expensive and stressful.
Robert Kavcic, senior economist at the Bank of Montreal, said the job market still looks very strong after assessing some of the monthly noise.
June also saw a faster pace of wage growth, with average hourly wages rising 5.2 percent year over year to $31.24.
Kavcic said previous wage growth figures have lagged and failed to reflect “on the ground reality”.
“These numbers now better reflect conditions in the real economy,” he said.
Compared to pre-pandemic wage growth, June recorded the fastest growth since comparable data was collected in 1998. However, wage growth in June was still below the most recent inflation rate of 7.7 percent reported in May.
Fabian Lange, an economics professor at McGill University, said wages must keep up with inflation to attract workers, as companies continue to struggle with hiring.
“Wage growth will be necessary given the tight labor market,” Lange said.
“If wages don’t rise, you’re essentially shifting income from the labor market to the companies that sell products at higher prices.”
Wage growth was led by gains among non-union workers, who saw their wages rise by 6.1 percent, while union workers saw a slower wage growth of 3.7 percent.
Higher interest rates on the way
The jobs report comes ahead of the Bank of Canada’s announcement of interest rates and monetary policy report next week.
The central bank is expected to raise its key interest rate on Wednesday, with most economists forecasting a three-quarters percentage point increase.
A recent study by the Canadian Center for Policy Alternatives warned that rapidly rising interest rates will likely plunge the Canadian economy into recession and cause significant “collateral damage”, including 850,000 job losses.
But for now, CIBC chief economist Avery Shenfeld said the Bank of Canada would not be held back from raising interest rates more aggressively, noting that hours worked are up 1.3 percent and offset the decline in job numbers. due to a lower labor force participation.
“On its own, the decline in newspaper jobs is not convincing evidence of a slowdown that will deter the Bank of Canada from a 75 basis point increase next week,” Shenfeld said in an email.
Service sector jobs fell by 76,000, wiping out gains made earlier in the year. The largest drop in employment occurred in the retail sector. The report said data from the coming months could help determine whether the decline was due to changing consumer behavior as inflation remains high.