Statistics Canada to release July employment figures this morning - BNN Bloomberg

Canada’s economy unexpectedly shed jobs last month, signaling a softening labor market at the beginning of the second half of this year.

The country lost 6,400 jobs in July, while the unemployment rate rose to 5.5 per cent, the third straight monthly increase, Statistics Canada reported Friday in Ottawa. The figures missed the median estimate for a gain of 25,000 positions in a Bloomberg survey of economists, but matched expectations for the jobless rate.

The still-tight jobs market, however, continues to boost workers’ compensation, with wages reaccelerating to 5 per cent, beating expectations for a 4.1 per cent gain and up from 3.9 per cent a month earlier.

July’s data, which followed a surprise gain of 59,900 jobs in June and 17,300 losses in May, shows an economy starting to gear down under the accumulated weight of 475 basis points of rate hikes by the Bank of Canada. While a string of firm economic data earlier this year prompted Governor Tiff Macklem and his officials to raise rates again in June and July after a five-month pause, recent indicators point to fading momentum.

So far this year, monthly employment growth has averaged 22,000.

Evidence is mounting that the central bank can keep rates on hold at the next meeting in September. Manufacturing, wholesale and retail data pointed to declines in June, when the economy is also expected to shrink for the first time this year. Inflation in June slowed to 2.8 per cent, entering the central bank’s control range for the first time since March 2021.

Still, policymakers are watching for signs that rates are restrictive enough to cool the economy, and they view wage growth of this magnitude as inconsistent with bringing inflation back to the 2 per cent target.

Further easing in overall wage growth could be on the horizon as high levels of immigration boost the pool of workers while demand slows. At the same time, employees may continue to demand higher compensation as expectations for inflation remain high.

Last month, total hours worked were up 0.1 per cent on a monthly basis and rose 2.1 per cent compared to a year earlier. That points to relatively weaker economic momentum at the start of the third quarter, when economists surveyed by Bloomberg expect growth in gross domestic product to slow to 0.4 per cent. Preliminary data indicated output growth slowed to 1 per cent in the second quarter.

This is the only jobs report before the next rate decision on Sept. 6, with another key data release for policymakers — July’s inflation print — coming Aug. 15. The majority of economists in a Bloomberg survey expect the bank to hold rates steady at 5 per cent.

With the jobless rate in Canada rising steadily since May, the three-month moving average now stands at 5.37 per cent, up from the 12-month low of 5 per cent. According to a recession indicator created by U.S. economist Claudia Sahm, once that rate rises half a percentage point or more, the economy is contracting. By that measure, if the unemployment rate holds or rises further over the next few months, it could signal Canada is entering a period of downturn.

The participation rate decreased 0.1 percentage point to 65.6 per cent. The employment rate, or the employed proportion of the population aged 15 and older, was 62.0 per cent, down 0.2 percentage points from a month earlier and little changed on a year-over-year basis. From January to July, the employment rate fell 0.5 percentage points, as population growth of 1.4 per cent outpaced 0.7 per cent gain in employment over this period.

Employment growth in the past year has occurred in the context of historically high population growth due to record immigration levels. In July, the employment rate of core-aged recent immigrants, who landed in the previous five years, was 77.7 per cent, down 2.3 percentage points from July 2022. In comparison, the employment rate of those born in Canada was 86.6 per cent in July, little changed from 12 months earlier.

Job losses were led by decreases in construction, public administration, information and recreation and transportation and warehousing.

Regionally, employment rose in Alberta, New Brunswick and Prince Edward Island, while it decreased in Manitoba and Saskatchewan and was little changed in the other provinces.

Separately on Friday, one of Canada’s biggest telecommunications firms, Telus Corp., announced that it’s seeking to reduce 6,000 staff globally.

--With assistance from Erik Hertzberg.

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Statistics Canada to release July employment figures this morning - BNN Bloomberg
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