The Canadian job market experienced a minor setback in July as the economy shed 6,000 jobs, causing the unemployment rate to inch up by 0.1 percentage point, reaching 5.5 percent. This marked the third consecutive monthly increase in the jobless rate, according to a report released by the government statistical agency on Friday.
Leading economists had projected a more moderate increase in new job opportunities, considering the average monthly gains of 22,000 observed since the beginning of the year. However, the reality proved to be different, indicating a potential slowdown in job creation.
Statistics Canada stated that certain sectors experienced a decline in employment. The construction sector saw a reduction of 45,000 jobs, followed by public administration (-17,000), information, culture, and recreation (-16,000), and transportation and warehousing (-14,000). On the other hand, some industries managed to see growth in employment, including health care and social assistance (+25,000), educational services (+19,000), finance, insurance, real estate, rental, and leasing (+15,000), and agriculture (+12,000).
Analysts have attributed the softer labor market to the overwhelming demand for work, which has been outpacing job creation. Interestingly, Canada's population recently surpassed 40 million in June, mainly due to a significant influx of immigrants. This influx has put additional pressure on the labor market and contributed to the more sluggish job growth.
RBC Economics analyst, Carrie Freestone, highlighted the underlying weakness in the economy, stating that job growth remained stagnant when accounting for the boost in the Canadian population. Meanwhile, Desjardins analyst, Royce Mendes, emphasized the success of the Bank of Canada's efforts to rebalance the labor market.
As a result of the latest data, analysts predict that the Bank of Canada will refrain from further interest rate hikes in the current economic cycle. In July, the central bank had increased its key interest rate by 25 basis points to five percent, but the recent employment figures suggest that a cautious approach might be necessary.
