The Canadian economy lost 31,000 jobs in July, while analysts expected a weak addition of 15,000 jobs. Still, the unemployment rate remained unchanged at a historic low of 4.9%, according to data released Friday by Statistics Canada.
Updated yesterday at 4:13 p.m.
In Quebec, after falling for two of the previous three months, employment remained practically stable in July, with a decline of just 4,500 jobs. The unemployment rate of 4.1% in July in Quebec continued to hover around a record low.
In the Montreal metropolitan area as well, employment changed little in July and the unemployment rate held steady at 4.7%.
In Ontario, employment fell by 27,000 in July and the unemployment rate rose 0.2 percentage points to 5.3%.
The labor market in Quebec and Ontario remains extremely tight. The lack of available workers probably partly explains the difficulty in maintaining growth in the total number of jobs.
Hélène Bégin, Senior Economist at Desjardins
“Even though it lost 31,000 jobs in July, for the second consecutive monthly decline, the Canadian labor market is not in decline,” report economists Kyle Dahms and Alexandra Ducharme at the National Bank.
“With the unemployment rate remaining at a historic low, we continue to see resilience in the Canadian economy. This resilience is also confirmed by the trend in average wages, which were still up by more than 5% on an annualized basis in July. »
Salary increase
According to data collected by Statistics Canada, for the second consecutive month, the average hourly wage of employees increased by 5.2% year-over-year in July to reach $31.14.
Moreover, it is in Quebec that wage increases continued to accelerate the most compared to the Canadian economy as a whole.
After the 7.5% jump observed in June, in annual variation, the increase in average hourly compensation in Québec accelerated in July to 8.1%. By comparison, in Ontario, wage growth held at around 5% in June and July.
“This faster wage growth in Quebec shows that the labor market is overheating more than in Ontario,” points out Hélène Bégin.
“The sharp acceleration in inflation and the still high expectations for the coming months combine with the labor shortage to explain the surge in wages. Labor costs are therefore increasing even more rapidly for businesses, which must also deal with the general rise in prices. But at this rate, will companies have the ability to stay on course for growth? »
Outlook
“Job creation, which seems to have stalled, and strong wage growth raise some concerns for the future,” continues economist Hélène Bégin.
Fears of a sharp economic slowdown are growing, which could ease some of the pressure on the job market. The unemployment rate remains low for the time being, but an increase is expected in the coming quarters.
Hélène Bégin, Senior Economist at Desjardins
At the Royal Bank, economist Carrie Freestone is also of the opinion that “we will begin to see the Canadian economy running out of steam in the months to come”, like what is happening in the United States.
“We are already seeing an increase in EI claims south of the border as demand for American labor begins to cool. Canada will not be far behind,” according to the Royal Bank economist.
“With the rapid rate hike by the Bank of Canada, which will continue in September, in order to curb the still very strong inflationary pressures, the economy should slow down and the labor market should cool down. So I expect the unemployment rate in Canada to start rising over the next few months and into early 2023.”