Canada’s labor market is still quite tight, but there are some ominous undercurrents showing up in the recent data.
According to Canada’s Labor Force Survey, total employment declined by 7500 jobs in May.
In May the economy created 24,000 part time jobs and lost 31,000 full time jobs.
Employment in manufacturing and construction declined sharply in May, emulating similar declines in the previous month. The unemployment rate remained at its historical 5.8% low level in May primarily because of a slight drop in the labor force participation rate.
Although the May employment figures are quite discouraging, nonetheless over the past twelve months the economy has managed to generate an average of 20,000 jobs per month. Nonetheless, the job growth pattern has been far slower on a six-month basis.
On a year over year basis, the average hourly wage rate increased 3.9% in May compared to 3.6% in April. Indeed, there is little doubt the Canadian job market is still very tight despite the softening in employment over the past six months. Canadian wage inflation is increasing even though the high wage manufacturing sector has been at the forefront of the recent job losses.
There is little doubt that one must be disappointed in the fact that full time jobs declined while only part time jobs increased in May. As well, one worries about the monthly decline in labor force participation, particularly if it signals a lack of good jobs.
12 of the16 industries surveyed by Statistics Canada reported wage gains above 4% in May, so real wages are also rising in Canada. In conclusion, the near 4% increase in money wages in May will likely reinforce the Bank of Canada’s decision to hike its policy rate in July.
