Canada’s unemployment rate fell to a new four-decade low in May, as the economy followed up April’s record hiring spree with a month of modest job gains and rising wages.
Statistics Canada’s monthly Labour Force Survey showed that the country added 27,700 net new jobs in May, with all of the gains coming in full-time employment. The relatively small increase, coupled with a decline in the number of people actively participating in the labour force, sent the unemployment rate down to 5.4 per cent from 5.7 per cent. That’s the lowest since Statscan began gathering comparable data in 1976, beating the previous low of 5.6 per cent set last November and December.
Economists had braced for the possibility of a small pullback in employment last month, after the April survey showed a record 107,000-job surge. Instead, the labour market posted its eighth rise in the past nine months – an almost unheard-of growth run in an economic indicator that is typically prone to ups and downs from month to month.
“What goes up, keeps on going up. The Energizer Bunny of global employment reports kept on ticking last month,” said Bank of Nova Scotia economist Derek Holt in a research note.
However, economists cautioned that the details beneath the surface of the report were mixed at best, with some encouraging signs offset by several weak spots.
On the upside, May’s gains all came in full-time jobs, with the part-time segment unchanged. And average hourly wage growth – which has been slow to pick up despite the persistently strong hiring demand and historically low unemployment – rose to 2.8 per cent year over year, from 2.5 per cent in April.
“Sustained job growth and low unemployment finally appear to be delivering the wage growth Canadians have been waiting for,” said Julia Pollak, labour economist at ZipRecruiter, an online job-search service.
But economists noted that self-employment was responsible for all of May’s job growth, while payroll employment in both the private and public sector fell slightly. They also noted that the drop in unemployment was largely due to a surprise decline of nearly 50,000 in the size of the labour force – something that’s not typically associated with labour-market strength.
“Looking past the new record low in the unemployment rate, this report was a bit on the soft side,” said Brian DePratto, senior economist at Toronto-Dominion Bank, in a research note.
Nevertheless, the labour market continues to be a pillar of strength for the Canadian economy, adding more than 400,000 jobs in the past nine months, including 250,000 since the beginning of this year. The continued growth of the employment numbers in May, especially on top of April’s massive increase, lends further support to the recent string of upbeat economic data indicating that the economy has picked up substantially in the second quarter of the year, after two straight quarters of near-zero growth. Economists now believe the second-quarter growth pace could be more than 2 per cent annualized – well above the Bank of Canada’s most recent forecast of 1.3 per cent.
“It looks as if the economy will show a resurgence in growth in the second quarter and third quarter, although one that is benefiting from a low starting point,” Canadian Imperial Bank of Commerce economist Royce Mendes said in a research report.
May’s gains were led by increases in health care and social services (up 20,400 jobs) and professional, scientific and technical services (up 17,200). On the downside, the business and building-support services segment lost 19,400 jobs, while accommodations and restaurant employment fell 12,400.
Among other key sectors, manufacturing rose by 9,400 jobs, while construction fell 8,600.
Five of 10 provinces posted job gains, led by Ontario, up 20,900, and British Columbia, up 16,800. On the downside, Quebec shed 11,600 jobs, while Newfoundland and Labrador fell 2,700, and Alberta dipped 2,200.