Canadian employers added 45,300 new jobs in June, another robust month of job creation that cemented expectations for an interest-rate hike on Wednesday.
Although the bulk of the new jobs were part-time positions and wage growth remained weak, the pace of employment creation has exceeded expectations for months. Since June of last year, the economy has created 351,000 new positions, the highest year-over-year job growth since oil prices were skyrocketing in 2013.
The monthly employment report is the latest piece of evidence that shows the strength of Canada's economic recovery after the energy downturn.
A strong gross domestic product reading for April and an optimistic business survey had already fuelled market and economist expectations that the Bank of Canada would raise interest rates at its monetary policy meeting on Wednesday.
After Statistics Canada released the labour force survey Friday morning, the odds of a rate hike occurring in July jumped to 95 per cent from about 70 per cent the previous week, according to Bloomberg.
"The labour market is giving a green light for the Bank of Canada to raise rates next Wednesday," Royal Bank of Canada said in a research note.
The national jobless rate eased from 6.6 per cent to 6.5 per cent on increased hiring in British Columbia and Quebec.
Employment in the western province jumped 4.4 per cent over June of last year, after a similar bump in the previous month and five consecutive periods of growth over 3 per cent.
Similarly, Quebec's jobs market has been booming for months, increasing by 3 per cent over June of last year.
Even Alberta, which eliminated thousands of jobs during the oil slump, has started to turn the corner. The province added 48,500 new jobs over the past year and its unemployment rate has continued to drop.
Over all, the torrid pace of job creation in Canada has raised the idea that the country is near full employment, or the point at which the jobless rate falls to the lowest level possible without causing inflationary problems.
For example, the employment rate for prime-age workers – or those between the ages of 25 and 54 – is near a record high. Their employment rate hit 82.4 per cent in June, the highest since early 2008 and much stronger than during the 1980s, when the employment rate for this key cohort was between 70 per cent and 75 per cent.
But the fact that wage growth has remained weak is one sign that Canada has not reached full employment. The average hourly wage for all employees across all industries in Canada increased 1.3 per cent to $25.88 over June of last year. For full-time workers, average hourly earnings were up 1 per cent to $27.44.
"Recent wage and price-inflation data suggest we're not there yet," said Avery Shenfeld, chief economist with Canadian Imperial Bank of Commerce. "But looking across all measures of labour market activity, history suggests that current readings aren't far from where full employment lies."
Douglas Porter, chief economist with Bank of Montreal, said people are still moving from weaker regions, such as Alberta, to stronger economies, such as B.C. and Ontario, which is "helping keep wage pressures in check."
According to the Bank of Canada's business outlook survey, nearly half of the participating firms said they would have problems meeting future demand increases, which could eventually drive up wages.
"If businesses are running into a scarcity of workers, I do think it will manifest in terms of higher wages," said Craig Alexander, chief economist with the Conference Board of Canada.
The Conference Board's model says full employment is when the national jobless rate hits 5.6 per cent. Though, Mr. Alexander said we will not know whether the country is at full employment until we see labour market strains developing. If the central bank boosts the benchmark rate of 0.5 per cent on Wednesday, it will be first rate hike in nearly seven years. The Bank of Canada cut rates twice in 2015 in response to the drop in oil prices.