EconoFACTS

June 10, 2022 | 09:13

Canadian Employment (May) — Labour Market Stays Strong

Economist

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Benjamin Reitzes

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Canadian employment rose 39,800 in May, nicely above expectations and continuing a solid run for the labour market. Combined with a steady participation rate, the unemployment rate fell a tick to 5.1%, a new record low for the Labour Force Survey. The details of the report were mixed. On the positive side, there was a huge gain in full-time jobs, more than offsetting the drop in part-time workers. However, all of the increase was in the public sector (the second largest on record) and self-employment, while private sector employment dipped. On a sector basis, job growth was entirely in the service sector, with solid gains in wholesale/retail, education, professional/scientific services, and hospitality. On the soft side, manufacturing plunged 43k, leaving the sector little changed from year-ago levels. Transportation & warehousing and finance/real estate were the other areas of notable softness.

Regionally, 7 of 10 provinces saw job growth, with Alberta leading the way at +27.5k, driving the jobless rate down 0.6 ppts to 5.9%, back below Ontario for the first time since in a year. There were only modest job gains in Quebec and Ontario, lifting their jobless rates somewhat. Notably, B.C. reported only a small increase in employment, but its jobless rate plunged 0.9 ppts to 4.5%, a near 3-year low.

Average hourly earnings accelerated to 3.9% y/y, the fastest in over a year and back around the pace seen pre-pandemic. And, with a small gain in wages in June 2021, a further acceleration next month looks likely. With all eyes on inflation, this stat could be the most notable part of this report. Lastly, hours worked dipped 0.3% in the month, with Q2 on pace for a small decline, not a good sign for GDP growth.

Key Takeaway: Yet another solid Canadian employment report. The acceleration in wages isn't alarming just yet but will garner more attention than usual given heightened inflation worries. There's nothing here to change the story for the Bank of Canada as the firm headline increase, record-low jobless rate, and rising wages will give the policymakers more confidence that the economy can withstand continued aggressive rate hikes.

Table 1 - Canada — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics