The Canadian jobs market remains remarkably strong. Data released today by Statistics Canada show that the economy added 40,000 jobs in May, dropping the national unemployment rate to an all-time low of 5.1 percent. Details of the release paint a somewhat more mixed picture than the headline, but there is little evidence that the economy faces any imminent risk of a downturn.
Full-time employment rose more than 135,000 in the month, offset by a fall of almost 96,000 in part-time positions. Employment in Canada now stands almost 500,000 above its pre-pandemic level, a remarkable contrast to the US, where employment remains below its early 2020 peak. The gains in May were mainly in public sector employment and were concentrated in the service sector, with goods-sector employment significantly lower. The increase in employment was also very uneven geographically: Alberta, embarking on something of a boom as oil prices surge, accounted for 28,000 of the job gains in the month.
Even with these caveats as to the details of today's report, there is nothing here to challenge the Bank of Canada's oft-repeated view that the economy is operating at full employment. The Bank will also be keeping a wary eye on the trend in wages. The year-on-year increase in average hourly earnings rose to 3.9 percent in May from 3.3 percent in April. While this remains well below the 6.8 percent increase in CPI, it will heighten concern at the Bank that wage could start to aggravate the existing supply-driven inflationary pressures.
This points unerringly towards another 50 basis point rate hike at the Bank's next policy adjustment data in July. And, as with the Federal Reserve, one can only bemoan the fact that the tightening cycle was not initiated just a little bit earlier.
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