Canada sheds jobs again, but unemployment rate holds at record low
Canadian employment fell for a second consecutive month in July, but the unemployment rate held steady at a historic low, a sign that labour market conditions remain tight.
Employers shed 31,000 positions last month, following a decline of 43,000 in June, Statistics Canada said in a report on Friday. Financial analysts on Bay Street were expecting a stronger return of 15,000 jobs added. Despite the decline, the unemployment rate remained at 4.9 per cent – the lowest in nearly five decades of comparable data – as fewer people sought work.
“At the headline level, we’ve definitely shifted gears to neutral,” said Brendon Bernard, senior economist at job-search site Indeed Canada.
While the Canadian labour market is stalling, the United States is surging ahead. American employers added 528,000 jobs in July – far more than expected – and the unemployment rate fell to 3.5 per cent, the lowest in 50 years. The figures bolster the case that the U.S., despite two quarters of economic contraction to start 2022, is not mired in a recession.
With the latest hiring binge, U.S. employment has returned to pre-pandemic levels, a milestone that Canada reached in late 2021.
Several analysts said Friday that the Bank of Canada was unlikely to alter its rate-hike cycle, despite the loss of momentum in hiring. This year, the bank has raised its policy rate to 2.5 per cent from 0.25 per cent, part of its continuing battle against the highest inflation in decades.
“The Bank of Canada will likely focus on the historic low unemployment rate and still strong wage growth to justify another non-standard rate hike at its next meeting” in September, said Andrew Grantham, senior economist at CIBC Capital Markets, in a note to investors.
Friday’s report showed job losses that were highly concentrated. The number of public-sector employees fell by 51,000. Ontario shed about 27,000 workers. And the losses were entirely in service industries, such as wholesale and retail trade, health care and education.
“What’s not entirely clear yet is whether the pullback in jobs is due to a lack of demand for workers – a slower economy – or a lack of supply of workers,” said Bank of Montreal chief economist Doug Porter in a note to clients.
On the demand side, there are conflicting signals. Some high-profile companies are cutting jobs or suspending plans to increase head count, citing the economic slowdown and rapidly increasing interest rates. Shopify Inc. said last week it was laying off about 10 per cent of its work force, largely because e-commerce sales aren’t growing as quickly as projected.
However, layoff rates in the broader economy have been subdued this year, said Mr. Bernard. Furthermore, some companies aren’t tapping the brakes on expansion, despite the economic headwinds.
“We have taken steps to materially increase our hiring capacity in a challenged people market such as this,” Michael McCain, the chief executive officer of Maple Leaf Foods Inc., said on an investor call on Thursday. “The old suite of hiring tactics simply isn’t adequate, and we are accelerating our activity.”
Employers were recruiting for about one million positions in May, near all-time highs, according to the most recent Statscan figures. More recently, the volume of job listings on Indeed has faded, though is still substantially higher than before COVID-19. It’s “not a dramatic shift in employer hiring appetite, more so an easing,” Mr. Bernard said of the Indeed numbers.
A potential concern for companies is that worker supply is dwindling. The labour force participation rate – the proportion of people either working or searching for a job – has fallen to 64.7 per cent in July from 65.3 per cent in June. Participation has fallen in all age brackets.
With a tight supply of labour, wages are growing quickly – although not as fast as inflation. In July, the average hourly wage rose 5.2 per cent on an annual basis, matching the rate in June. Consumer prices grew at an annual rate of 8.1 per cent in June, the highest in nearly 40 years.