Canada's labour market is showing resilience in the face of global turmoil, though cautious employers are restraining the pace of hiring and the jobless rate is expected to remain lodged at around 7 per cent.
Employers added 22,300 positions in May, bringing the three-month average to about 27,000 jobs a month. The unemployment rate subsided to 7.4 per cent - its lowest level in more than two years - though that stemmed from fewer people looking for work rather than hiring sprees.
Several factors are keeping employers nervous. The global economy remains on shaky ground and several U.S. indicators on housing and employment highlight persistent weakness. Governments at all levels are moving into restraint mode - with layoffs in Ottawa already beginning earlier this month. And a strong Canadian dollar is causing headaches for exporters.
"Headwinds are going to pick up, and job creation will moderate," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank, who thinks the jobless rate will stick around the 7-per-cent mark through to 2013. "Most of the progress on the unemployment rate is in the rear-view mirror."
The cautious outlook for jobs is another sign of an economy straining to gain traction. Worries are growing that the global economy is losing steam, as China takes measures to cool its surging growth and inflation, and Europe wrestles with Greece's debt crisis and the battered finances of several countries.
Such worries have rattled investors, sending stocks into a prolonged slump. Toronto's S&P/TSX index sank 171.74 points or 1.3 per cent Friday to a six-month low of 13,084 as energy and mining stocks dropped.
In the United States, the Dow Jones industrial average and the S&P 500 each slumped 1.4 per cent Friday to close out their sixth straight week of losses, as financial and energy shares fell.
Canada's jobs report showed some positive trends. Growth in full-time work outweighed a drop in part-time positions, and new jobs in the private sector partly offset public-sector declines. Employment gains over the past year have been particularly strong for older workers.
On the other hand, self-employment fuelled much of last month's increase, which economists tend to view as a sign people can't find work elsewhere. And the higher-paying manufacturing sector has shed jobs for three months in a row, while the lower-paying services side of the economy showed growth.
"I don't like to see the participation rate drop - people giving up looking for work. And the services side is not as lucrative, so that's a concern for income growth," said Andrew Gretzinger, portfolio manager at Manulife Financial.
Wage gains pose little inflationary threat. They cooled further in May, to 2.2 per cent from a year ago. That's the lowest increase since December of last year, according to Bank of Nova Scotia economists Karen Cordes Woods and Derek Holt.
"After stripping out inflation, real wages are going nowhere and that remains bearish for consumer spending as households are simply unable to post income growth beyond covering higher fuel and grocery costs in a generalized commodity shock," they said in a note.
Now that governments are shifting into budget-balancing mode, the public sector is unlikely to be much of a driver of new jobs. Federal Finance Minister Jim Flaherty said last week it's time for the private sector to step in and create jobs.