In an unexpected turn of events, Canada experienced a setback in its job market as unemployment rates rose for the first time in several months. According to the national statistical agency, Canada lost 17,000 jobs in May, pushing the unemployment rate to 5.2 percent. This news comes as a surprise following a period of robust employment growth, which saw the creation of approximately 400,000 new jobs since September.
Desjardins analyst Royce Mendes commented on the situation, stating, "After a long string of outsized gains in job growth, hiring apparently hit a rough patch in May." The majority of the job losses were in the full-time and self-employed sectors. The agency reported decreases in employment in areas such as business, building, and other support services, as well as professional, scientific, and technical services. However, there was an increase in employment in manufacturing, other services, and utilities.
Mendes also highlighted the decline in total hours worked, which fell by 0.4 percent in May, describing it as "ugly." Despite this, the wage numbers provided a glimmer of hope for workers, as they continue to show an annual growth rate of over five percent.
Looking ahead, RBC assistant chief economist Nathan Janzen emphasized that more economic data is scheduled to be released before the next interest rate announcement in July. The Bank of Canada, after being the first major central bank to pause its aggressive monetary policy in March to combat inflation, recently increased its key lending rate to 4.75 percent. This move followed a series of consecutive rate hikes that began in June 2022, when interest rates were at a record low.
Janzen noted that there may be softer data releases in the coming months, but he believes it will take more negative surprises to derail plans for another rate hike in July.
The unexpected rise in unemployment and job losses in Canada has highlighted the vulnerability of the job market despite previous months of strong growth. As the country moves forward, economists and analysts will closely monitor upcoming data to assess the potential impact on future monetary policies and employment trends.
