Canada job gains beat forecasts but jobless rate rises

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Canada’s economy added 60,000 jobs in June, three times what was forecast, but the unemployment rate ticked up to 5.4 per cent as more people searched for work.

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The surge in employment suggests another interest rate hike from the Bank of Canada could be on the table next week, economists said.

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Gains in full-time work drove the increase, but there were also signs that the labour market is loosening.

June marks the second month in a row that the jobless rate has risen, bringing it to its highest level in more than a year, Statistics Canada said on July 7. It still, however, remains below the pre-pandemic average of 5.7 per cent.

Wage growth also softened last month, rising 4.2 per cent from a year ago, compared with the 5.1 per cent gain year over year in May. Total hours worked were mostly unchanged in June and were up two per cent on a year-over-year basis.

“The surge in employment in June suggests that another rate hike at the Bank of Canada’s meeting next week is nailed on,” wrote Olivia Cross, an economist with Capital Economics, after the data was released.

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“That said, with the unemployment rate also increasing and wage growth easing, we remain convinced that the Bank will not need to raise its policy rate above five per cent.”

This big headline jobs gain likely tilts the balance toward another 25 bp hike, said BMO economist Benjamin Reitzes, while  TD senior economist Leslie Preston said if the central bank does skip a meeting and hold its rate on July 12 “their tone is likely to remain hawkish, and a September hike would remain on the table.”

The month’s job gains were concentrated among young men aged 15 to 24 and men aged 25 to 54, according to Statistics Canada. Little changed for employment among women of all age groups.

Employment was up in wholesale and retail trade with 33,000 more jobs added, while manufacturing added 27,000 jobs. There was also an uptick in health care and social assistance jobs as the sector added 21,100 positions, as well as transportation and warehousing with 10,000 more.

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Construction and educational services, on the other hand, each lost 14,000 jobs in June. Declines were also recorded in the agriculture sector.

Statistics Canada said there were fewer students working at the beginning of the summer, following a slow start to the summer job season for young women in May.

The U.S. job market also remained more resilient than expected, possibly pushing the Federal Reserve to keep interest rates higher for longer in its campaign to defeat inflation.

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