July 07, 2023 | 09:23
Canadian Employment (June) — Strong Jobs Point to Another BoC Rate Hike
Canadian employment surged 59.9k in June, handily beating our above-consensus call. The details were mostly firm, with all of the gains in full-time jobs (+109.6k) and the private sector (+82.5k). Indeed, part-time, self-employed and public sectors were all down. On a sector basis, the gains were led by wholesale/retail (+32.6k), manufacturing (+27.3k) and health/social assistance (+20.7k). However, nine of 16 sectors saw job declines with education (-14k) and construction (-13.5k) the worst performers.
The unemployment rate rose two ticks to 5.4% as labour force growth of 114k trumped the job gain. The jobless rate is now up 0.4 ppts in two months and is above year-ago levels for the first time this cycle. Historically, we've only seen the unemployment rate rise 0.5 ppts y/y (or more) in periods of economic weakness.
Two soft spots were wages and hours. Wage growth slowed to +4.2% y/y, down 9 ticks and the lowest in 13 months. However, before reading too much into the figure, note that there's a lot of volatility in this wage measure and a north-of-4% reading is still well above levels consistent with the 2% inflation target given Canada's terrible productivity performance. Hours worked climbed just 0.1% despite the big full-time gain. For all of Q2, hours worked are up 1.8% annualized, consistent with our call for 1.5% GDP growth.
Key Takeaway: This is a solid report overall even if it has some blemishes. The big headline increase and ongoing strength in the labour market likely tilts the balance toward another 25 bp hike at next week's Bank of Canada policy announcement.