The Canadian economy continues to create jobs, but at an anemic pace. As a result, the unemployment rate increased from 6.1% to 6.2% from April to May.
After an increase of 90,000 in April, 27,000 jobs were added in May, reports Statistics Canada. In Quebec, employment changed little and the unemployment rate remained unchanged at 5.1%. The unemployment rate in the Montreal metropolitan area increased from 5.8% to 6% from April to May.
The unemployment rate in Quebec reached a historic low of 3.9% in November 2022. Since then, employment has been up and down, but the upward trend has continued. “The deterioration of the labor market reacts with a certain lag compared to the general economic context,” underlines Desjardins economist Hélène Bégin. The unemployment rate in Quebec should continue to increase in the coming months to reach 6% at the end of the year, according to her.
The employment figures for the month of May correspond to what economists predicted, who point out that the weakness of the Canadian economy does not allow jobs to be created at the same rate as the increase in the population.
The working age population is up by 98,000 while there are 27,000 more jobs in May.
According to Statistics Canada, part-time employment increased in May, but full-time employment declined. Over the past year, there have been more part-time jobs (+3.8%) than full-time jobs (+1.6%). The health care, financial, insurance, accommodation and food services sectors made gains.
The number of people who work part time, but would like a full-time job, has been increasing over the past year, according to the survey.
The increase in involuntary part-time work means that the labor market is more fragile than indicated by the unemployment rate, according to economists Matthieu Arseneau and Alexandra Ducharme of the National Bank.
“With around 50% of SMEs saying they are worried about their sales, we doubt a significant recovery in hiring in the coming months,” they write in their analysis of the latest employment data. The unemployment rate in Canada will rise to 7% by the end of the year, predicts the National Bank.
Salary progression
The average hourly wage continues to increase at a good pace. It increased 5.1% in May compared to a year earlier. Wage pressures therefore remain strong, which is food for thought for the Bank of Canada, which began reducing its key rate this week.
If wage increases do not moderate and fuel inflation, the reduction in interest rates could be slower, some economists say.
Economist Marc Desormeaux, from Desjardins, believes on the contrary that the increase in the unemployment rate in May increases the probability of a second cut in the Bank of Canada’s key rate in July. “Even if wage pressures remain a risk to monitor, the labor market continues to relax and inflation is easing,” he commented, which should satisfy the central bank and encourage it to continue the drop in rates.
Manitoba has the lowest unemployment rate in the country, at 4.9%. A sign that the job market has cooled considerably, the unemployment rate is increasing across all age groups in Canada. Young people aged 15 to 24 are the most affected, with an unemployment rate of more than 12% in Canada and 9.1% in Quebec.