The Canadian economy unexpectedly lost 6,400 jobs in July, according to data released this morning from Statistics Canada.
The overall employment figure consisted of a loss of 8,100 part-time positions and a gain of 1,700 full-time positions. That caused the unemployment rate to tick up to 5.5% from 5.4% in June.
The declines were largely in construction, which saw a pullback of 44,700 positions in the month, followed by public administration (-16.7k) and information and culture (-15.8k).
Job gains continued to be seen in healthcare (+25.1k), education (+18.8k) and finance, insurance and real estate (+15k).
StatCan also reported a rise in wage growth, with average hourly earnings up 5% year-over-year, up from 4.2% in June.
“July’s release contained many signs that the Canadian economy is slowing under the weight of sharply higher borrowing costs,” noted Marc Desormeaux, principal economist at Desjardins. “This should give the Bank of Canada reassurance that its tightening continues to work as expected.”
Bank of Canada still expected to maintain hawkish bias
While there are now signs that the country’s labour market is starting to loosen, economists believe the Bank of Canada will want to see more data prior to its September 6 policy meeting before changing its hawkish tone and signalling another pause to rate hikes.
“While odds of another rate hike dropped following this report, the BoC will need to see more of the same before it can feel like its job is done,” wrote James Orlando of TD Economics.
RBC economist Carrie Freestone added that while there are a “slew of indicators” to be released prior to the Bank’s next rate meeting, the key question for the BoC will remain whether interest rates are “sufficiently restrictive to tame inflation.”
“Today’s jobs report is a point in favour of keeping the overnight rate at 5%, but the BoC will closely monitor additional indicators – particularly upcoming inflation and consumer spending reports – to determine whether an additional hike is needed,” she wrote.
August employment data will be released on September 8, 2023.