Unemployment Rate Hits Highest Level in Over a Year
In a concerning sign for the Canadian economy, the unemployment rate rose to 6.4% in June, up from 6.2% in May. This marks the fourth consecutive month of increasing unemployment rates, with the job market showing no signs of improvement.
Job Market Continues to Stagnate
According to Statistics Canada, the economy lost a total of 1,400 jobs in June, following the addition of 27,000 positions in May. While the number of jobs lost may seem minimal, it is essential to consider that this translates to a slowdown in job growth when accounting for population growth.
Industries Affected by Job Losses
The transportation, warehousing, culture and recreation, public administration, construction, and professional and technical services sectors were among those that saw declines in employment. On the other hand, accommodation, food services, and agriculture experienced increases in employment.
Long-term Unemployment Remains Elevated
In a concerning trend, long-term unemployment remains elevated, with 17.6% of currently unemployed workers out of work for 27 weeks or more. This is down slightly from 18.2% in May but still well above the recent low of 13.3% last August.
Youth Unemployment Reaches Highest Level Since 2014
Among youth, unemployment rates have reached their highest level since 2014, with many young Canadians struggling to find employment. This is a concerning trend that may have long-term implications for the economy and society as a whole.
Wage Growth Continues to Accelerate
Despite the job market stagnation, wage growth continues to accelerate, with the average hourly wage rising to a 5.4% year-over-year pace. This is significantly higher than inflation rates, which are currently at 2.9%.
Bank of Canada Faces Dilemma
The Bank of Canada will assess employment and wages before its next rate decision on July 24. Economists are divided on whether the Bank of Canada should cut interest rates in response to the job market stagnation.
Economist Insights
- BMO chief economist Douglas Porter notes that wage growth is a significant concern, with average hourly wages increasing by 2.5 points above inflation.
- Andrew DiCapua, senior economist at the Canadian Chamber of Commerce, believes that wage growth will discourage a faster rate-cutting cycle.
- Marc Desormeaux, principal economist at Desjardins, thinks that the Bank of Canada will look at broader measures of compensation to determine their monetary policy report.
Population Growth Contributes to Job Market Slowdown
While the total number of jobs lost in June may seem minimal, when accounting for population growth, the slowdown is more pronounced. CIBC senior economist Andrew Grantham estimates that Canada’s population grew by 99,000 people in June and 1.11 million in the past year.
Conclusion
The Canadian job market continues to stall, with unemployment rates rising to their highest level in over a year. While wage growth accelerates, economists are divided on whether the Bank of Canada should cut interest rates in response to the stagnation. The economy faces significant challenges, and it remains to be seen how policymakers will respond to these developments.
Share Your Thoughts
What do you think is causing the job market stagnation? Should the Bank of Canada cut interest rates in response? Share your thoughts with us on social media using the hashtag #CanadaJobMarket.