Despite the rise in the unemployment rate in Canada and Quebec in June, the job market remains solid enough for the Bank of Canada to raise its key rate again next week.
After a loss of 17,300 jobs in May, the labor market rebounded in June, adding 60,000 jobs, which is three times what economists expected.
This recovery in the labor market “virtually guarantees an increase in the key rate in July,” said Marc Desormeaux, economist at Desjardins.
Despite the rebound in employment, the unemployment rate fell from 5.2% to 5.4% in Canada, its highest level since February 2022. This increase reflects the increase in the pool of workers due to the strong immigration.
“In June, the population aged 15 and over increased by a record 84,000,” note economists from the National Bank. The increase in the number of jobs (+0.3%) was not enough to absorb the increase in the number of available workers (+0.5%).
Quebec, for its part, lost 8,400 jobs, especially in the public sector, and its unemployment rate rose from 4% in May to 4.4% in June. Last month, Quebec posted an increase of 1,600 jobs. The labor market remains tight in Quebec, but the pressure is decreasing, according to the Institut du Québec. Since January, Quebec has lost 13,400 jobs and wage growth, which has been rising faster than inflation since the start of the year, has slowed from 5.4% in May to 4.2% in June.
The June jobs report is the last before the Bank of Canada’s next interest rate decision, due July 12. Most economists are expecting a 25 basis point hike that will take the key rate to 5%.
Wages are moderating
The rare encouraging note for the central bank is that wages are rising more slowly. The increase in the average hourly wage, which had exceeded 5% for four months, slowed to 4.2% in June. This is its weakest increase since May 2022.
At 4.2%, the increase in the average hourly wage is still twice as high as the Bank of Canada’s inflation target, which is 2%. Year over year, however, the deceleration in wages is more notable, at 3.9%.
Montreal, ahead of Toronto and Vancouver
Unemployment increased in the Montreal metropolitan area in June. The unemployment rate fell from 3.9% in May to 4.7%. Despite this increase, the unemployment rate in Montreal remains lower than in other major Canadian cities. Toronto posted an unemployment rate of 6.3%, down 0.2%. In Vancouver, the unemployment rate rose from 4.9% in May to 5.7% in June.
Mostly full-time jobs
The jobs added in June in Canada are mostly full-time jobs, and in the private sector. Sectors that gained jobs were manufacturing, forestry, retail and health care. The losers are construction, agriculture and utilities.
Employment gains are concentrated in Ontario (+59,000) and Alberta (+11,000), while losses are mainly in Quebec (-8,200) and British Columbia (-3,000).