Could the decline in employment in June come on top of these statistics showing a slowdown in economic activity and making recession inevitable in the eyes of an ever-growing number of analysts?
Statistics Canada tells us that employment fell by some 43,000 jobs in June. The unemployment rate certainly set a new record low of 4.9%, but this is due to the drop in the number of people looking for work. “This is the first decline in employment that has not been associated with a tightening of public health restrictions since the start of the COVID-19 pandemic”, underlines the federal agency.
This decline is concentrated in Quebec (27,000 jobs lost) and Ontario (24,700). It is essentially attributable to the drop in the number of workers aged 55 and over (-51,000) and the drop in the number of self-employed workers (-59,000). Against the backdrop of high job vacancies and accelerating wage growth, but also economic uncertainty, 5% of the self-employed in May became employed in June. This proportion is more than twice the average rate of 2.4% recorded from 2016 to 2019, notes Statistics Canada.
In addition, there was a loss of 39,000 part-time jobs, but also 4,000 full-time, in a situation of labor shortage. Total hours worked increased by 1.3% in June, a signal seen as indicative of a tight labor market, but which must also be seen in the context of a general shortage of personnel.
For its part, long-term unemployment has returned to its pre-pandemic level. The number of people continuously unemployed for 27 weeks or more was down 24,000 from May. But of those in this group in May, 21.3% stopped looking for work in June, while 9.4% started working. The others (69.3%) remained unemployed.
The average hourly wage rose 5.2% (or $1.54, to $31.24) year-over-year in June, an acceleration from the 3.9% increase measured in May and 3.3% recorded in April. In the aftermath, the latest inflation reading as measured by the consumer price index (CPI) points to a 7.7% year-over-year increase in May.
Quebecers are doing better in terms of purchasing power protection, benefiting from an annual increase in average hourly earnings which was 6.9% in May and rose to 7.5% in June, with , as a backdrop, a CPI up 7.5% in May.
Towards a short recession?
Economists’ interpretation of Statistics Canada’s June data essentially reveals a labor market that remains extremely tight, as evidenced by the unemployment rate at its lowest point, the acceleration of wage increases, the increase in hours worked and job gains in more productive sectors.
Looking at the data for Quebec and Ontario, Hélène Bégin, senior economist at Desjardins Group, points out, however, that “the extent of job losses in June is surprising and raises some concerns”, this contraction occurring in a context where Fears of a sharp economic slowdown are growing.
The analysis firm Oxford Economics has calculated that since 1973, Canada has experienced seven recessions. Excluding the pandemic, GDP has fallen an average of 2.5% since its peak over a period of between three and four quarters. In the last 50 years, there have only been two periods of monetary tightening by the Bank of Canada that did not trigger a recession.