Canada Unemployment Rate Rises to 5.4% in June — Update

By Robb M. Stewart

OTTAWA--Canada's jobless rate ticked higher for a second month running in June as more people looked for work and even as hiring rebounded, suggesting the door likely isn't closed to another increase in interest rates as early as next week.

The bigger-than-expected rise in employment for the month, the largest increase since January, was driven by full-time work and comes as Canada's labor force continues to grow. Still, central bank officials may take some comfort from a cooling in wage growth.

The number of employed working-aged people in Canada rose 59,900 in June from the month before, while the unemployment rate was 0.2 percentage point higher at 5.4%, the highest since February last year, Statistics Canada reported Friday. Market expectations were for gain of 20,000 jobs and an unemployment rate of 5.3%, according to economists at TD Securities.

Employment in May slipped by 17,300 jobs, with losses centered around youth, following strong hiring since last September that had kept the jobless rate only just above the record low 4.9% hit last June and July.

When calculated using U.S. Labor Department methodology, Canada's unemployment rate in June was 0.2 percentage points higher at 4.4%.

Recent indicators have painted a somewhat mixed picture of Canada's economy but haven't shaken the view it remains relatively resilient, despite expectations of subdued growth more than a year into the Bank of Canada's campaign of raising interest rates to dampen inflation. Bank officials will meet to decide on rates Wednesday, having last month boosted the policy rate one-quarter percentage point to a 22-year high of 4.75% to end a short-lived pause on tightening following strong consumer spending in the first quarter and amid heightened concerns inflation could become stuck above the 2% target.

Industry-level gross domestic product was essentially unchanged in April, though Statistics Canada's early indicator points to solid growth of 0.4% on-month in May, and annual inflation in May cooled to 3.4%, the slowest pace since mid-2021 despite still elevated food prices. The housing market, meanwhile, has recovered in recent months, stoking expectations among some economists the central bank will consider back-to-back rate increases.

Even with the rise in employment in the last two months, the rate remains below the pre-Covid-19 pandemic average of 5.7% since in the year through February 2020.

Average hourly wage growth, a statistic the Bank of Canada has been watching for signs of inflationary pressures, eased to 4.2% in June after running above 5% growth for the previous five months.

With employment rising and unemployment higher in June, the labor-force participation rate--the proportion of the working-age population who were either employed or unemployed--edged up 0.2 percentage points from May to 65.7%.

Friday's jobs report showed all the jobs added in June were in full-time employment, which rose by 109,600, not far off the 114,000 monthly increase in Canada's overall labor force. Part-time jobs slipped by 49,800.

Statistics Canada said employment among core-aged men between 25 and 54 rose by 0.5% on month, bringing the cumulative gain since March to 92,000, and was little changed among core-aged women. Employment was up in wholesale and retail trade, healthcare and social assistance, and in manufacturing and transportation and warehousing.

Total hours worked were unchanged month-over-month in June, though up 2.0% on a year earlier.

The report indicated the ranks of the self-employed were down 0.7% in June. The number of private-sector employees rose 0.6% from May, while the number of public-sector workers was ticked down 0.1%, the agency said.

Write to Robb M. Stewart robb.stewart@wsj.com

(END) Dow Jones Newswires

July 07, 2023 08:51 ET (12:51 GMT)

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