The Canadian labour market geared down from its April hiring surge, adding a modest 27k new positions in May. The gain was entirely in part-time jobs (+62k), while full-time employment declined (-36k).
The unemployment rate continued its upward trend in May. The unemployment rate rose one tenth from April to 6.2% in May, as 54.5k labour market entrants exceeded the number of people who found jobs. Related unemployment indicators also paint a picture of increased challenges finding work. For example, long-term unemployment (>27 weeks) has risen from 13.2% last year, to 18.2% in May.
The service sector saw most of the hiring. The biggest increases in jobs were business, building and other support services (+19k; +2.7%), finance, insurance, real estate, rental and leasing (+29k; +2.0%), health care and social assistance (+30k; +1.1%) and accommodation and food services (+13k; +1.1%). Meanwhile, construction lost jobs (-30k) as did transportation and warehousing.
Lastly, total hours were flat, and are up 1.6% over the past year. That is despite employment rising 2% over the same period. Wage growth picked up to 5.1% year-on-year in May from 4.7% in April, largely due to base effects which are expected to peter out after June.
Key Implications
The Canadian labour market geared down in May and shows many signs of cooler job market conditions. Hiring continues, but Canada’s population has grown 3.4% over the past year and 2% growth in employment is not strong enough to keep the unemployment rate from rising. And it’s not just population growth, signs of softness are widespread: people are unemployed longer, job gains over the past year have been skewed towards the public sector, and the more cyclical goods sector has lost jobs over the past year.
Typically the jobs data is the week’s marquee star, but the Bank of Canada’s interest rate cut on Wednesday (see analysis) stole the show. There is plenty in May’s jobs data that supports the case for lower interest rates. However, the economy has cooled, but it has not fallen off a cliff. We expect that will lead to a gradual pace of interest rate reductions this year, with the BoC likely to cut at every other meeting. We expect a further 50 basis points in reductions in the policy rate by the end of the year easing this year.
