Labour force data for July, released by Statistics Canada this morning, leave little room for doubt that the jobs market is slowing sharply. The economy shed 24,000 jobs in the month, while the number of people seeking work rose by 11,000. As a result, the national unemployment rate rose by 0.2 percentage points to 5.7 percent. Although the year-on-year gain in employment is still impressive at 353,000, the weaker trend that has emerged in recent months is now unmistakable.
Looking beyond the headlines, there is little consolation to be found in the details of the report. The private sector shed almost 70,000 jobs in the month. This was partly offset by higher employment in public administration, primarily in Ontario, which is downright bizarre given the Ford government's focus on cost-cutting. There was also a reported gain of 27,000 in the ultra-volatile (and frankly suspect) category of self employment. Without that, the headline numbers would have looked very much worse.
This report is likely to heighten market expectations that the Bank of Canada, despite its largely upbeat rhetoric, will have to follow the Fed's lead in cutting rates sooner rather than later. However, there is one aspect of the data that must make the Bank nervous about easing. The growth of hourly earnings has been moving steadily higher in recent months and reached a 10-year high of 4.5 percent in July. If the July employment numbers are a harbinger of greater slack in the jobs market going forward, the upward trend in wage gains may soon go into reverse. If that does not happen, the Bank will have to balance the need to support the economy against worries over allowing inflation to move above target.
No comments:
Post a Comment