Statistics Canada reports steady 6.4% unemployment in July amid job losses and concerns for the economy
Statistics Canada reported on Friday that Canada's unemployment rate remained steady at 6.4 percent in July, while the economy lost 2,800 jobs and the employment rate dipped slightly, as reported by Financial Post.
This mirrors June's results, where there was a loss of 1,800 positions. Economists tracked by Bloomberg had anticipated a rise in the unemployment rate to 6.5 percent and expected the economy to add 25,000 jobs.
The Bank of Canada has been closely monitoring the labour market. Recent minutes from the bank’s deliberations reveal that officials have intensified their focus on the job market, concerned that further weakness could negatively affect consumer spending and economic growth.
Stephen Brown, deputy chief North America economist at Capital Economics, commented that this is the second consecutive month of job losses, which might indicate a downturn in the labour market.
However, Brown believes that the decline is largely due to reduced hiring among younger Canadians. He pointed out that the one percent month-over-month increase in hours worked paints a more positive picture.
Despite this, Brown acknowledged that the Bank of Canada would be concerned about the strong 5.2 percent year-over-year increase in average hourly wages.
He predicts that the bank will proceed with a 25-basis point rate cut at its September 4 meeting but believes the continued strength in wage growth makes a larger 50 basis point cut unlikely.
Andrew Grantham, an economist at CIBC, noted that the details of the July jobs report were mixed. While the number of full-time positions increased by 62,000, part-time positions fell by 64,000. Statistics Canada also recorded a sharp decline in private sector employment.
However, Grantham mentioned that the increase in hours worked could positively impact July's gross domestic product (GDP). He expressed doubts that the July report would alleviate the Bank of Canada's concerns about the labour market, despite the unemployment rate holding steady.
CIBC now expects 25 basis point rate cuts at each of the three remaining Bank of Canada meetings this year, following weaker-than-expected US jobs data.
Nathan Janzen, assistant chief economist at RBC, stated that there was nothing in the July labour force data to suggest that the cooling in the labour market has ended.
He highlighted that the unemployment rate, which is up nearly one percentage point from a year ago, would have risen further in June if not for a significant drop in the labour force participation rate, which fell to 65 percent from 65.3 percent.
Janzen also noted that the number of people looking for work declined by 11,000, despite the population increasing by 125,000. He downplayed concerns about wage growth, suggesting that further signs of softening in the labour market might lead to a slowdown in wage increases.
Given the softening economic conditions in Canada, RBC expects the Bank of Canada to cut interest rates for a third consecutive time next month.
