Canada's jobs market weakened in June

Data from Statistics Canada today show that Canada's employment market weakened in June, both in terms of the headline numbers and the details. This will make it easier for the Bank of Canada to consider another rate cut at the end of the month, although the continued strength in wages may be an issue. 

Employment fell by a negligible 1400 in the month, but this was sufficient to push the unemployment rate up by 0.2 percentage points, to 6.4 percent, exactly one percentage point higher than in June 2023. The factor driving unemployment inexorably higher was once again the immigration-driven surge in the population and the labour force. Canada's population rose by almost 99,000 in the month to stand 1.11 million higher than a year ago, while the labour force grew by 40,000, bringing the year-on-year increase to almost 590,000. 

There is no conceivable way for the economy to create enough jobs to keep up with this growth. even though the increase of 343,000 in total employment over the past year is a strong showing by historical standards.  That fact is reflected in the steady decline in the employment rate, which fell by a further 0.2 percentage points in June to stand at 61.1 percent, 1.1 percentage points lower than a year ago.  Total hours worked also fell in June, falling 0.4 percent, though this measure remains 1.1 percent higher than a year ago. 

Despite the weakness in job growth and the evidence that the pool of available workers is growing fast, wage gains remain too high for the Bank of Canada's comfort, especially in light of Canada's poor productivity performance.  In fact, the year-on-year rise in average hourly earnings accelerated to 5.4 percent in June from 5.1 percent in May  This is the only element of today's report that may give the Bank of Canada pause about cutting rates again in the near term.

Meanwhile in the US, analysts are choosing to view the 206,000 jobs added in June as evidence that job market pressures are slowly easing, an impression reinforced by downward revisions to the data for the two preceding months. One factor that will make the Fed's future rate decisions easier is the subdued growth in wages, with average hourly earnings up just 3.9 percent from a year ago. The Bank of Canada should be so lucky.