Canada’s economy unexpectedly lost a net 1,400 jobs in June, resulting in a higher-than-expected unemployment rate of 6.4%, which is the highest in 29 months.
Unemployment Trend:
The jobless rate has been on an upward trend over the past year, rising 1.3 percentage points since April 2023 and reaching its highest level since January 2022.
Youth Unemployment:
The unemployment rate for youth rose to 13.5%, the highest since September 2014, indicating challenges in the job market for young Canadians.
Wage Growth:
Despite the job loss, the average hourly wage growth of permanent employees accelerated to an annual rate of 5.6%, the fastest since December, which could impact inflation.
Bank of Canada’s Perspective:
BoC Governor Tiff Macklem stated that the labor market had cooled reasonably in recent months and emphasized the possibility of economic growth and job creation without jeopardizing the bank’s inflation target.
Market Reactions:
The Canadian dollar firmed slightly against the U.S. dollar, while yields on the Canadian government’s two-year bonds dropped after the release of the job data.
Implications for Monetary Policy:
The weak job figures might increase the likelihood of a July interest rate cut, with markets now leaning towards a rate reduction.
Sectoral Employment Changes:
In June, full-time jobs were shed, while part-time positions were added. The goods sector saw an increase in employment, particularly in agriculture, while the services sector experienced job losses, notably in transportation and warehousing, as well as information, culture, and recreation.
Overall, the report indicates a mixed picture of the Canadian job market, with challenges in employment alongside notable wage growth, prompting considerations for monetary policy adjustments.
