Canadian employment dropped in June, although not enough to dent what was otherwise a stellar first half of 2019 that saw robust hiring and a sustained pick-up in wage growth.
Over all, Canada’s labour market added nearly 250,000 jobs over the first six months of the year, powered by hiring in the private sector and full-time positions. In percentage terms, it was the best start to a year since 2010, and suggests the Bank of Canada will stand pat Wednesday as calls mount for its U.S. counterpart to cut rates for the first time since the financial crisis.
In June, employment dropped by 2,200 positions and the country’s unemployment rate climbed a tick to 5.5 per cent, as more people entered the labour force, according to Statistics Canada’s Labour Force Survey. Economists had expected a ho-hum report, given a number of rip-roaring returns to start the year, including a record 106,500 jobs added in April.
Beneath the headline figures, however, there were plenty of positive signs in June.
“Perhaps the most noteworthy aspect to [Friday’s] report was the massive rise in wages,” Douglas Porter, chief economist at Bank of Montreal, said in a note to clients.
Indeed, average hourly wages increased 3.8 per cent in June from a year ago, marking the seventh consecutive month of “hearty wage gains,” Mr. Porter said. Wage growth is a closely watched metric, in large part because gains have been lacklustre across the industrialized world for some time despite historically low jobless rates.
“In Canada, oil industry woes have been blamed for depressing national wage growth," Fotios Raptis, senior economist at Toronto-Dominion Bank, said in a client note. "With the June data this no longer seems to be a factor.”
Despite the overall job loss, the number of full-time positions climbed by more than 24,000 in June. Over the first half of 2019, full-time work increased by about 217,000 positions, accounting for close to 90 per cent of the country’s total job gains.
Moreover, the private sector added 23,000 jobs in June, and so far this year it has accounted for 86 per cent of Canadian hiring.
Eight of 10 provinces have increased employment this year, with Manitoba and Newfoundland and Labrador the exceptions. Ontario has accounted for more than half of Canada’s job gains in 2019, and in Quebec, the jobless rate ticked down to 4.9 per cent in June, tying its record low since comparable data became available in 1976.
Canada is riding a wave of strong data that suggest the economy has rebounded smartly in the second quarter, after a rough start to the year. Earlier this week, the trade deficit swung to a surplus, driven by a broad-based surge in exports. Monthly readings of economic growth have strengthened, and inflation is running hotter, too.
Thus, economists broadly expect the Bank of Canada will keep its key interest rate at 1.75 per cent on Wednesday, and perhaps for the foreseeable future. The BoC last cut rates in 2015, when the country was mired in an oil-driven downturn.
“With inflation at target, low unemployment, and wage gains more in line with expectations of policy makers at this point in the cycle, there is little motivation for the Bank of Canada to change course,” TD’s Mr. Raptis said.
“Unlike our southern neighbour, interest rate ‘insurance’ cuts remain unlikely this year. That said, the prolonged period of elevated trade policy uncertainty may keep the Bank of Canada from considering moving rates higher even if the data continue to prove modestly stronger than expected.”
Should it stay on the sidelines, the Bank of Canada would find itself out-of-step with recent trends in global monetary policy. When the Federal Reserve convenes later this month, many observers expect the U.S. central bank to cut rates for the first time since 2008.
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