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Canada's labour market fell short of expectations in June, leading to an increase in the unemployment rate to 6.4%.
Despite this weak report, most economists believe the Bank of Canada will not rush its next rate cut later this month.
Statistics Canada reported today a net loss of 1,400 jobs in June, with a gain of 1,900 part-time positions and a loss of 3,400 full-time jobs. Economists had anticipated a gain of 25,000 positions.
"This report drives home the point that the Canadian labour market can simply no longer be considered tight–in fact, it is quickly tipping in the other direction," wrote BMO chief economist Douglas Porter.
The unemployment rate rose two percentage points to 6.4%, meaning there were 1.4 million unemployed individuals in June, an increase of 42,000 from May.
Regionally, Quebec saw a net loss of 18,000 positions (-0.4%), while gains were reported in New Brunswick (+3,000; +0.8%) and Newfoundland and Labrador (+2,600; +1.1%).
Average hourly wages were also up on a year-over-year basis, rising 5.4% to $34.91.
Bank of Canada rate cuts still expected to be gradual
Despite the softening labour market, economists say the Bank of Canada is still likely to proceed cautiously with its next rate cut.
"As a standalone result, the softening job market raises the odds of a Bank of Canada rate cut," Porter said. "However, wages remain the very definition of sticky, which will give the Bank pause."
He adds that the June inflation results will need to be "exceptionally tame" for the bank to deliver a July rate cut. "But the underlying softness in the job market sets the stage for additional rate cuts later this year," he noted.
TD's Leslie Preston adds that key economic indicators yet to be released before the Bank’s July 24 rate decision will help determine if borrowers see a July or September rate cut.
"In either case, Canada's economy is not falling off a cliff and we expect rate cuts will be gradual over the remainder of the year," She wrote. |