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The Canadian economy continued to see a net rise in new jobs created last month, however all of the gains consisted of part-time positions.
Statistics Canada reported today that the economy added a net 26,700 jobs in May, with a gain of 62,000 part-time positions and a loss of 36,000 full-time jobs.
The unemployment rate ticked up to 6.2% from 6.1%.
"The Canadian labour market geared down in May and shows many signs of cooler job market conditions," wrote TD economist Leslie Preston. "Hiring continues, but Canada's population has grown 3.4% over the past year and 2% growth in employment is not strong enough to keep the unemployment rate from rising."
Regionally, employment was up in just three provinces, led by Ontario’s net gain of 49,500 (+0.6%)—its fourth straight rise in five months, but with practically all of the gains being in part-time positions. Alberta saw the largest net loss of positions, down 20,400, with its unemployment rate rising to 7.2%.
Average hourly wages were also up on a year-over-year basis, rising 5.1% to $34.94.
Implications for future Bank of Canada rate moves
Economists say the weakening labour market likely leaves the Bank of Canada with little regret about cutting its benchmark rate by 25 basis points this week.
And with unemployment rising and core inflation continuing to ease, most expect the central bank will continue to gradually reduce interest rates throughout the remainder of the year.
"There is plenty in May's jobs data that supports the case for lower interest rates. However, the economy has cooled, but it has not fallen off a cliff," Preston added. "We expect that will lead to a gradual pace of interest rate reductions this year, with the BoC likely to cut at every other meeting."
Earlier this week, the Bank said it is closely monitoring wage gains, which had been stabilizing. However, today's data showed wages increased unexpectedly to 5.1% in May from 4.7% in April.
"While much of the report fits the slowdown narrative to a T, the one troubling aspect for further BoC rate cuts was a rebound in wages," noted BMO Chief Economist Douglas Porter. "Still, the Bank will note the rising slack in the job market–the steady climb in the jobless rate, and the rise in the involuntary part-time rate to 18.2%–and conclude that it's a matter of time before wage growth relents."
RBC's Nathan Janzen agrees that other indicators–declining GDP-per-capita and slowing inflation–are likely to carry more sway with the central bank. In addition, he notes that other wage measures from company payrolls are showing smaller increases than today's labour force survey numbers.
"The BoC won't regret cutting interest rates this week and with interest rates still at 'restrictive' levels, there is room to cut further without stoking a resurgence in price growth," he wrote. |