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 another record low of 4.9 per cent, according to Statistics Canada’s latest labor force survey on Friday.
The unemployment rate in May was 5.1 percent, the lowest since at least 1976, which is well behind comparable figures. “The labor market still looks very strong after looking out for some of the monthly noise,” Bank of Montreal senior economist Robert Kavcic said in an email. Looking ahead, Cavcic said BMO expects a “substantial slowdown in the economy later this year.” The Bank of Canada is expected to raise its key interest rate on Wednesday, with most economists expecting a rise of three-quarters of a percentage point. A recent study by the Canadian Center for Policy Alternatives warned that rapidly raising interest rates would likely send the Canadian economy into recession and could cause significant “collateral damage,” including 850,000 job losses. For now, however, CIBC chief economist Avery Shenfeld said the Bank of Canada would not be deterred from raising rates more aggressively, with a 1.3 per cent increase in hours worked and job cuts offset by lower labor force participation. “By itself, the decline in jobs is not yet a convincing sign of a slowdown that would prevent the Bank of Canada from raising 75 basis points next week,” Shenfeld said in an email. The fall in the unemployment rate in June was attributed to fewer people looking for work, according to Statistics Canada, while the job loss was driven by a drop in self-employment by 59,000 jobs. For business owners, the declining labor force participation rate only adds to their labor shortage woes. Mark Kitching, owner of Waldo’s on King bistro and wine bar in London, Ont., says recruiting challenges continue. He says he could hire two or three more kitchen staff, but is not accepting applications. “I’ve talked to people in my industry and we all have the same problem,” Kitching said. Vacancies in Waldo’s average staff have to work overtime, which Kitching says makes it more expensive and stressful to operate. June also saw a faster pace of wage growth, with average hourly wages rising 5.2 percent year over year to $31.24. Cavcic said previous wage growth numbers were lagging and did not capture the “reality on the ground”. “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 were collected in 1998. However, June wage growth was still below the most recently reported 7.7 percent inflation rate in May. The increase in wages led to gains among non-union workers, who saw their wages rise 6.1 percent, while union members saw a slower wage increase of 3.7 percent. Employment in the public and private sectors remained stable. Services manufacturing jobs fell by 76,000, erasing gains seen earlier in the year. The largest decline in employment occurred in retail trade. The report said data from the next few months may help answer whether the decline is due to changing consumer behavior as inflation remains high. Good manufacturing employment rebounded, with 33,000 jobs added. This report by The Canadian Press was first published on July 8, 2022.
