Canadian Employment Shake-Up: Over 6,000 Jobs Disappear as Unemployment Rises to 5.5%
OTTAWA: Canada Experiences Unexpected Job Losses, Impacting Rate Hike Expectations
Canada saw an unexpected decline in employment figures as nearly 6,400 Canadians lost their jobs in July, causing the unemployment rate to rise from 5.4% in June to 5.5%, according to recent data.
These figures align with analyst predictions that the Bank of Canada will halt its interest rate hike campaign. A Reuters poll of analysts had forecasted a net job gain of 21,100 for July, along with an unemployment rate increase to 5.5%.
Although the Canadian labor market has exhibited resilience, supported partly by strong immigration, the recent data has led to concerns about economic softening. Despite the central bank’s ten rate increases since March 2022, the economy lost jobs in two of the last three months.
Amid inflation concerns, the Bank of Canada had raised rates in June and July, emphasizing its commitment to closely monitoring data before making further moves. The next rate announcement is scheduled for September 6.
Money markets have adjusted their expectations, with a 28% probability of a rate hike in September, down from 32% prior to the data release. Additionally, markets foresee a 60% chance of another rate hike by year-end, down from 80% before the data.
Doug Porter, chief economist at BMO Capital Markets, highlighted signs of economic softening and a six-tenths of a percentage point increase in the unemployment rate since July 2022. He suggested that the central bank might consider a pause on rate hikes.
Despite the overall decline in employment, the average hourly wage for permanent employees rose by 5.0% from July 2022. However, this increase was lower than May’s 5.1% and April’s 5.2% year-over-year rises.
Capital Economics’ Stephen Brown commented that the rise in wages is unlikely to be sustained, and the softer labor market data supports the view that the Bank is unlikely to follow through with current market pricing for further rate hikes.
Canada has experienced an average monthly employment growth of 22,000 this year, according to Statscan.
The Bank of Canada’s decision-making will consider two more key data sets before the September 6 rate announcement: July inflation data, scheduled for August 15, and second-quarter growth data, set for release on September 1.
