Economy sheds 7,500 jobs in May, but unemployment rate holds steady
Canada’s economy unexpectedly lost jobs for the second month in a row in May, but wages posted their fastest year-over-year increase in nine years, Statistics Canada said Friday.
The economy lost 7,500 jobs in May as a drop in full-time employment was only partially offset by an increase in part-time jobs, while the unemployment rate held steady at 5.8 per cent for the fourth consecutive month.
Economists had expected an increase of 17,500 jobs, according to Thomson Reuters Eikon.
However, average hourly wages, a key indicator watched by the Bank of Canada, increased 3.9 per cent compared with a year ago, the monthly reading’s largest annual increase since April 2009.
Bank of Montreal senior economist Robert Kavcic said the wage growth suggests a strong labour market in Canada and an economy running near potential.
“It reinforces the idea that the labour market is really pushing full employment and tightening up enough to drive wage growth,” he said.
Kavcic said that combined with other recent economic data including a strong trade report this week, the Bank of Montreal is maintaining its forecast for the Bank of Canada to raise its key interest rate in July.
“We think the bank is still good to go,” he said.
The Bank of Canada kept its key interest rate on hold in an announcement last week, but dropped a reference to remaining “cautious.” Economists interpreted the change as a hawkish signal suggesting that the next interest rate hike may be sooner rather than later.
The central bank has raised its target for the overnight rate three times since last summer and it now stands at 1.25 per cent.
Paul Ferley, assistant chief economist at Royal Bank, said some of the growth in wages reflected minimum wage increases introduced this year in both Ontario and Quebec, but those increases do not explain all of the upward pressure.
“Evidence of labour markets operating slightly beyond capacity with a low unemployment rate and attendant upward pressure on wage growth argue for the Bank of Canada to continue tightening,” Ferley wrote in a brief note to clients.
The overall drop in the number of jobs came as full-time jobs fell by 31,000, offset in part by a gain of 23,600 part-time positions.
The loss of jobs came as the health-care and social assistance sector lost 24,000 jobs, while the manufacturing sector lost 18,000. Employment in construction fell by 13,000.
Sectors gaining jobs included the accommodation and food services sector, which added 18,000 jobs, helped by growth in British Columbia. The professional, scientific and technical services sector added 17,000 and transportation and warehousing added 12,000.
Regionally, Prince Edward Island added 800 jobs for the month, while employment in B.C. fell by 12,000 for the month.
In Quebec, a drop in full-time work was offset by a gain in parttime to leave the province little changed for the month. Statistics Canada says there was virtually no change in the number of people working in Ontario.
On a year-over-year basis, overall employment was up by 238,000 jobs or 1.3 per cent, due to gains in full-time work.