Canada Sheds Jobs for a Second Month But Wages Are on a Tear

(Bloomberg) -- Canada’s tight labor market took a small step back in May with a surprise loss of jobs that was in contrast to other signs of strength like the fastest wage gains in a decade and unemployment at record lows.

The number of positions declined by 7,500 in May after a 1,100 drop in April, while the unemployment rate held at 5.8 percent, Statistics Canada said Friday in Ottawa. Economists surveyed by Bloomberg News projected a 23,500 job increase -- with no one seeing a decline -- and an unchanged jobless rate.

Canada’s dollar weakened after the report while swaps markets signaled little change in expectations for the central bank to raise interest rates for the fourth time in a year in July. That’s because overall wage gains of 3.9 percent were the fastest since April 2009, giving Governor Stephen Poloz more evidence that pockets of slack in the economy may be fading.

The “mixed report” is still “lending some support to them taking the next step in July” Brittany Baumann, macro strategist at Toronto-Dominion Bank, said in a telephone interview. TD has the closest job forecast in the Bloomberg survey.

Canada Sheds Jobs for a Second Month But Wages Are on a Tear

The job slowdown won’t be a major jolt to the economy after some out-sized gains over the last year, and the overall economy is on pace to grow faster than 2 percent this quarter, she said. Canada has still added a net 238,200 new positions over the past year.

Another sign the economy remains tight was a separate Statistics Canada report showing industrial capacity utilization climbed to 86.1 percent in the first quarter, the highest since 2006. It was the seventh consecutive gain.

Canada’s dollar weakened 0.2 percent to C$1.2995 per U.S. dollar at 9:55 a.m. Toronto time. Futures trading signaled the odds the Bank of Canada will boost its 1.25 percent policy rate next month were 80 percent.

Highlights

  • Full-time employment fell by 31,000 in May, and part-time work increased by 23,600. Similar to the overall trend, the full-time losses give back a small part of the 289,700 gain over the past year
  • The number of hours worked climbed 2 percent in May from a year earlier
  • Goods-producing industries led the declines, including 18,300 in manufacturing and 13,000 in construction. Services employment rose by 21,500
  • The labor force participation rate of 65.3 percent is the lowest since October 1998
  • Canada hasn’t reported back-to-back job declines since the end of 2014

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