Sunday, July 21, 2024

Canada’s job market faces unexpected challenges in June

Canada’s economy encountered a setback in June as it unexpectedly shed a net 1,400 jobs, sending the unemployment rate soaring to a 29-month high of 6.4%, according to data released on Friday by Statistics Canada.

Economists surveyed by Reuters had anticipated a robust addition of 22,500 jobs for the month, coupled with a modest rise in the unemployment rate to 6.3% from May’s 6.2%.

The latest figures reveal a notable downturn in the labor market, with the unemployment rate climbing steadily over the past year by 1.3 percentage points since April 2023. This marks the highest level since January 2022, excluding the pandemic years.

The challenges in employment were particularly pronounced among young Canadians, where the unemployment rate surged by 0.9 percentage points to reach 13.5%, the highest level since September 2014 outside of pandemic peaks. Core-aged men also faced increased joblessness in recent months, reflecting broader difficulties in the job market.

Despite the overall job losses, there was a silver lining in wage growth. The average hourly wage for permanent employees accelerated to an annual rate of 5.6% in June from 5.2% in May, marking the fastest pace since December.

Bank of Canada (BoC) Governor Tiff Macklem had previously noted a cooling trend in the labor market but emphasized that achieving the central bank’s inflation target of 2% did not necessarily require higher unemployment. He highlighted potential for economic growth and job creation without jeopardizing inflation control.

Sector-wise, employment in the goods-producing industries saw a modest increase of 12,600 jobs, primarily driven by gains in agriculture. However, the services sector experienced a net loss of 14,100 jobs, led by declines in transportation, warehousing, and information-related industries.

The total number of unemployed individuals in Canada rose by 3.1% in June, bringing the total to 1.4 million people actively seeking work.

The unexpected weakness in the labor market has raised speculation about a potential interest rate cut by the Bank of Canada in July. The central bank had already reduced its key policy rate in June for the first time in over four years, citing a need to support economic growth amidst cooling inflation. Market analysts now anticipate further cuts if inflation continues to moderate.

The next policy rate announcement from the Bank of Canada is scheduled for July 24, closely following the release of new inflation data on July 16, which will likely shape the central bank’s decision-making going forward.

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