The Canadian economy posted a surprise loss of jobs in June, the first monthly decline that was not associated with tighter public-health restrictions since the outset of the pandemic.
Overall employment fell by 43,000 last month, unwinding the increase of 40,000 in May, Statistics Canada said on Friday. Financial analysts were expecting a gain of 22,500 positions. The job losses were concentrated among the self-employed and those 55 and older.
Also on Friday, the United States reported that 372,000 jobs were created there in June, about 100,000 more than analysts were expecting. This is a sign that economic headwinds have yet to stifle many companies’ hiring plans.
Despite the pullback in Canada, the unemployment rate fell to a new record low of 4.9 per cent (from 5.1 per cent in May) as fewer people searched for work.
Hiring conditions remain challenging in Canada, and at last count employers were recruiting for about one million positions – far higher than job-vacancy levels before the pandemic. That’s putting upward pressure on salaries.
Average hourly wages rose 5.2 per cent in June from a year earlier, up from 3.9 per cent in May. This rise is consistent with other data that show wages are accelerating as employers struggle to find workers. Even so, wage growth isn’t close to matching inflation, thus eroding purchasing power.
“Forget the messy headline number,” Doug Porter, chief economist at Bank of Montreal, said in a note to investors. “The main take-away here is that Canada has the tightest job market in generations, and now wages are starting to move with purpose.”
In reaction to Friday’s report, Bay Street analysts reiterated their predictions that the Bank of Canada will raise its policy rate next week by three-quarters of a percentage point, to 2.25 per cent from 1.5 per cent.
“The story remains largely the same,” Royce Mendes, head of macro strategy at Desjardins Securities, wrote to clients. “With inflation sky high, the Bank of Canada needs to hike rates aggressively to get them more appropriate levels even if there are more cracks forming in the foundation of the economy.”
The June job losses were tied largely to self-employment, which fell by 59,000 last month. The ranks of the self-employed are a weak spot for the labour recovery: Figures are down by nearly 250,000 workers (8.6 per cent) from prepandemic levels.
Statscan noted that 5 per cent of people who were self-employed in May became employees in June. That was about twice as high as the average transition rate (2.4 per cent) seen from 2016 to 2019.
The loss of work was also pronounced for older Canadians (55 and up), who saw their employment decline by around 51,000 in June.
Wage growth, while picking up, can differ widely. Permanent employees, for instance, saw their average hourly wages jump 5.6 per cent in June from a year earlier, while for temporary employees hourly wages rose only 2.8 per cent. Meanwhile, non-unionized employees saw their wages climb 6.1 per cent (to $29.90 an hour), quicker than a 3.7-per-cent gain (to $34.42) for those with union coverage.
“While having union coverage can increase employees’ ability to negotiate larger wage increases, these increases can be delayed until collective agreements expire and a new round of collective bargaining begins,” Statscan said in Friday’s report.
Canada has seen many work stoppages of late as unions push for stronger wage increases to counter rapidly increasing consumer prices. The inflation rate hit 7.7 per cent in May, the highest since 1983.
Royal Bank of Canada said Thursday in a report that the rate-hike cycle, while “necessary” to tamp down inflation, would curb growth enough to tip Canada into a “moderate and short-lived” recession in 2023. RBC is the first major lender in the country to predict a recession by next year.
RBC also said a downturn would lead to job losses and drive up the unemployment rate to 6.6 per cent – still quite low by historical standards.
Many of the details in the Statscan report were encouraging. The total number of hours worked rose 1.3 per cent. Employment jumped by 33,000 in the goods-producing sector, with hefty gains in construction and manufacturing. And students were working at higher rates than in 2019, pointing to strength in the summer job market.
“The major point is that workers are now extremely scarce,” Mr. Porter said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.