Unemployment rate rises to 5.4% despite job growth. BoC rate hike still on track
The creation of 60,000 new jobs in June wasn’t enough to keep the national unemployment rate from rising to a seven-month high.
The June employment report released by Statistics Canada this morning was highly anticipated as it’s the last major data release the Bank of Canada will see before next week’s monetary policy meeting.
And while the results were somewhat of a “mixed bag,” there’s overall agreement that the Bank of Canada is likely to go ahead with another quarter-point rate hike on Wednesday.
June employment details
Employment gains for the month of June came in triple what analysts had expected, with a net gain of 59,900 new jobs. That consisted of a gain of 109.6k positions and a loss of 59.9k part-time jobs.
Because growth of labour force participation (+0.3%) outpaced employment gains, the national unemployment rate rose two percentage points to 5.4%, its highest level since January.
The largest gains in employment were in wholesale and retail trade (+33k) and manufacturing (+27k), while losses were seen in construction (-14k), education (-14k) and agriculture (-6k).
Wage growth also eased in June, with average hourly earnings posting an annualized gain of 4.2% to $33.12. That’s down from 5.2% in May.
Jobs data “all but assures” a July rate hike
Despite some mixed results, observers say the report is still mostly strong, with the headline employment figure more than recouping the job losses in May.
As a result, the Bank of Canada is expected to remain on track to deliver a second consecutive quarter-point rate hike at its upcoming monetary policy meeting on Wednesday.
“The strong jobs print virtually assures another 25bp hike at the Bank’s next meeting…and keeps the door open for more increases going forward,” noted Marc Desormeaux, principal economist at Desjardins.
RBC Economics economists agree that another rate hike is imminent, despite “signs that the economic backdrop is softening.”
“Consumer delinquency rates are edging higher, job openings are edging lower, and wage growth is slowing,” wrote assistant chief economist Nathan Janzen.
“But the BoC highly likely planned more than one interest rate hike when they ended a short pause in increases last month,” he added. “Economic growth data and ‘sticky’ core inflation readings since then haven’t been soft enough to derail those plans.”