The July employment data released this morning by Statistics Canada make grim reading. True, the unemployment rate was unchanged at 6.4 percent after edging higher for many month, but just about all of the details of the report make grim reading -- and even the unemployment rate may be understated, given the growth in the working age population during the month.
The economy shed 2800 jobs in the month, with a gain of about 61,000 full time jobs more than offset by a decline of about 64,000 in part time employment. The private sector shed 42,000 jobs in the month, while public sector employment rose by 41,000. Over the past year, private sector employment has risen 0.6 percent, against a 4.8 percent rise in public sector jobs.
Some of the big picture statistics provide cause for concern. In line with recent trends, the working age population surged by 125,000 in the month, and yet the labour force supposedly fell by 11,000. Given "normal" participation rates, the labour force might have been expected to rise by about 50-60,000 in the month, which would have pushed the unemployment rate sharply higher. It remains to be seen whether these figures will be revised: recall that Canada's monthly employment figures are notoriously volatile.
In further evidence of the deterioration in underlying labour market conditions, both the participation rate and the employment rate continued their slow but steady march lower. Aside from some depressed readings in 2020/21 (i.e. the COVID pandemic), the participation rate now stands at its lowest level since 1998.
All of these numbers point unambiguously to a further rate cut by the Bank of Canada in September. Given Canada's poor productivity performance, the 5.2 percent annual rise in hourly earnings reported for July (down from 5.4 percent in June) is still way too high for the Bank's comfort. However, it is becoming increasingly clear that the downside risks for the real economy are starting to outweigh the upside risks for inflation.
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