(Ottawa) Canada’s labor market is showing signs of slowing as the jobless rate rises and wage growth slows, but with another solid gain in jobs last month, forecasters still expect an uptick interest rates next week.
The economy added 60,000 jobs in June, boosted by gains in full-time work, Statistics Canada said Friday.
But as more Canadians looked for work and the population continued to grow, the unemployment rate soared to 5.4%, its highest level in a year.
“The reason the unemployment rate may rise alongside historically strong job growth is that population growth continues to set new records, including a monthly increase of 84,000 in June,” Nathan Janzen wrote. , Royal Bank’s Deputy Chief Economist, in a note to clients.
June marked a second consecutive month of increases in the jobless rate, as economists monitor easing in the labor market amid high interest rates.
Labor market gains were concentrated in wholesale and retail trade, manufacturing, health care and social assistance, and transportation and warehousing.
The slack in the labor market is likely good news for the Bank of Canada, which is looking for signs that its aggressive rate hikes are helping to cool the economy.
But forecasters still expect the central bank to raise interest rates in its next interest rate decision on Wednesday.
“June’s labor market data was mixed, but it shouldn’t be enough to prevent the Bank of Canada from following through with a second consecutive 25 basis point interest rate hike in the next policy decision, the next week,” Mr. Janzen said.
The quarter-percentage point hike took the central bank’s key interest rate to 4.75%, its highest level since 2001.
The Bank of Canada has repeatedly claimed that Canada’s strong labor market is contributing to high inflation, raising concerns about the pace of wage growth in particular.
However, Statistics Canada revealed that wage growth also slowed last month, rising 4.2% from a year ago. That compares to a 5.1% annual gain in May.
The central bank gave no clear indication of its plans, saying it would make its decision based on economic data.