Canada’s unemployment rate settled at 4.9% in July, matching the record low set in the previous month.
The total number of unemployed people stabilized at 1 million in July. In addition, 426,000 people wanted a job but did not search for it, and therefore did not meet the definition of the unemployed. That hasn’t changed much for the sixth month in a row. Adjusted unemployment ratee – wWhich explains this source of potential labor supplyp – pIt reached 6.8%, the lowest rate since comparable data first became available in 1997.
In addition, employment in Canada fell by 31,000 jobs, which is not a huge change according to Statistics Canada. Canada lost about 74,000 jobs from May to July, but from May 2021 to May 2022, employment increased by more than a million.
However, July marks the second consecutive month of lower employment in Canada. In addition, the record low unemployment rate along with more than a million job vacancies means that Canada is still facing a tight labor market.
“Two consecutive months of low employment suggest that the Canadian labor market is operating in the face of capacity constraints, with little room for upward movement,” RBC economist Carrie Friston wrote in an economic report. “Demand for workers remains very high with vacancies still 65% above pre-pandemic levels (although the number of vacancies continues to decline), and there are few unemployed Canadians available to fill these vacancies.”
Employment among public sector employees decreased by 51,000 (1.2%) in July, the first decline in the sector in 12 months. The decline was largely concentrated in Ontario and Quebec. Despite declining on a monthly basis, employment in the public sector increased by 5.3% (+215,000) compared to July 2021.
The number of self-employed rose by 34,000 (+1.3%) in July after declining by 59,000 (-2.2%) in June. Despite this increase, self-employment remained flat year-over-year and was 214,000 (-7.4%) below the pre-pandemic level in February 2020.
Employment decreased by 53,000 (-0.3%) in the productive services sector for the month of July. Wholesale and retail trade contributed to the biggest losses in this sector. The number of workers in the wholesale and retail trade decreased by 27,000 (-0.9%) in July, the second consecutive monthly decline. Most of the net decline occurred in Ontario and Quebec.
“Job losses have been strangely concentrated in the services sector, including wholesale and retail trade, education and health,” Andrew Grantham of CBI told Reuters. “With vacancy rates on the rise in some of these sectors; it appears that labor supply rather than demand is the main issue. However, the main difference between today’s report and last month’s report is that wage growth unexpectedly slowed.
Average hourly wages for employees rose 5.2% (+1.55 to $31.14) year-over-year in July, roughly the same annual rate of increase seen in June (+5.2%; +1.54). For the second month in a row, average hourly wages grew at a similar pace among part-time workers (+5.0%; +1.05) and full-time workers (+4.9%; +1.52). Earlier in 2022, wage growth was faster among full-time employees than among part-time workers.
The latest inflation data indicated the CPI rose 8.1% year-on-year in June, the largest annual change in nearly 40 years.
“The rising cost of living is raising the temperature at the collective bargaining table,” economist Liam Daly wrote in a media statement for the Canadian Conference Board. Given the rate of inflation, unions argue that annual wage increases are simply insufficient. Amid high vacancy rates and low unemployment, workers are negotiating from an enhanced position.”
The main conclusion is that the labor market remains very tight, Doug Porter, an economist at BMO, said in a statement to Reuters.
“We’re still dealing with the lowest unemployment rate in at least 50 years, and wages are getting stronger,” Porter said. “But from a growth standpoint, the reality is that employers are having a hard time finding employees, so this limits the growth of the economy.”
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