The Canadian economy unexpectedly shed a net 6,400 jobs in July while the jobless rate ticked up to 5.5%, data showed on Friday, hardening analyst expectations that the Bank of Canada could pause its interest rate hike campaign.
Analysts polled by Reuters had forecast a net gain of 21,100 jobs and for the unemployment rate to edge up to 5.5% from 5.4% in June. Some 8,100 jobs were shed in part-time work, more than offseting a marginal gain in full-time employment, Statistics Canada said.
Canada's labor market, supported in part by strong immigration, has been resilient even as the Bank of Canada raised its key overnight rate ten times since March 2022 to cool the economy. The Bank, which raised rates in June and July in a bid to help drive down inflation to its 2% target, is due to make its next announcement on Sept 6.
"There were a number of areas that saw declines, so it doesn't seem like it's a fluke and perhaps this is a real sign that things are indeed starting to soften," said Doug Porter, chief economist at BMO Capital Markets. "I think their (the Bank's) conclusion from this would be that it's probably not a bad idea to pause on the rate hike front," he said by phone.
The Canadian dollar edged down to C$1.3375 against the US dollar, or 74.77 US cents. While headline figures indicated some slowness, the average hourly wage for permanent employees - a figure the Bank of Canada watches closely - rose 5.0% from July 2022. That was higher than the 3.9% annual rise in June, but lower than May's 5.1% and April's 5.2% year-over-year increases. Andrew Grantham, senior economist at CIBC Capital Markets, said the data brought mixed messages for the central bank" (This) is unlikely to convince the Bank of Canada that the labor market has loosened enough yet to sustainably achieve its 2% CPI target, despite the weaker headline jobs count," he said.
Including July's losses, Canada's monthly employment growth has still averaged 22,000 this year, Statscan said. The goods sector lost a net 27,500 positions, driven by construction jobs, while the services sector gained 21,200 jobs, helped by gains in healthcare and social assistance as well as educational services industries.