OTTAWA — The Canadian economy appears to be receding from the rapid job growth it experienced earlier this year, with employment numbers declining in July for a second straight month, even though the unemployment rate is down. stay fixed.
Indeed, at 4.9%, the unemployment rate is still at its lowest since the beginning of the collection of comparable data in 1976, indicated Friday Statistics Canada in its most recent survey of the labor force. The economy lost 31,000 jobs in July, after seeing 43,000 disappear in June.
Economist Brendon Bernard of Indeed said that while the loss was still within the survey’s margin of error, it still signaled a change.
“It seems that the recovery of employment, which had the foot on a strongly depressed accelerator pedal, has shifted to a more neutral speed,” observed Mr. Bernard.
Mr. Bernard added that the unemployment rate remained unchanged despite the loss of jobs due to a drop in the labor force participation rate. The proportion of people who are working or actively seeking work has fallen from the all-time high reached in March 2022.
The Canadian labor market remains exceptionally tight, with more than one million vacancies across the country.
In its latest report, Statistics Canada says that despite persistent labor shortages, it sees no evidence of an increase in the proportion of people leaving or changing jobs.
In addition, the participation rate of Canadians aged 25 to 54 is relatively unchanged from what it was before the pandemic.
For the month of July, the number of public sector employees decreased, while the number of self-employed increased. The number of workers in the private sector changed little.
CIBC economist Andrew Grantham noted that job losses in July were concentrated in the service sector, including wholesale and retail trade, education and health care.
“With some of these sectors showing high vacancy rates, labor supply, rather than demand, appears to be the main issue,” Grantham said in an email.
Mr Bernard admitted he had expected a stronger recovery in the accommodation sector, which had been hit hard by the pandemic, but that momentum did not materialize. “I think part of the story is just that people have moved on to other sectors,” he said.
The pace of wage growth was also flat from June, with average hourly earnings rising 5.2% year over year.
Labor shortage continues
Canada’s labor shortage is driven by demographic shifts in the population, with the number of people retiring outpacing the number of people entering the workforce. But Mikal Skuterud, an economics professor at the University of Waterloo, expects things to improve in the long run.
“Twelve to eighteen months from now, I would be very surprised if labor markets were as tight as they are now. And I think the difference will be quite substantial,” predicted Skuterud.
The Statistics Canada report also dwelt on the continued shortage of workers in the health sector, with a particular focus on nurses. According to Statistics Canada, more than one in five nurses (20 per cent) worked paid overtime in July, the highest level since comparable data became available in 1997.
By comparison, about 10% of all other employees worked overtime in July.
As Canada faced a seventh wave of COVID-19 infections, 11.2% of nurses were on sick leave for at least part of the week when the Labor Force Survey was conducted.
Further rise in interest rates likely
The Bank of Canada is paying close attention to employment levels in the country ahead of its next key interest rate announcement in September. Experts generally expect it to raise interest rates again.
As economic growth slows in the country and the central bank attempts to rein in inflation with higher interest rates, economists have pointed to the strong labor market condition making the slowdown unique in its nature.
The Bank of Canada is hoping for a “soft landing,” where inflation comes down without interest rate hikes triggering a severe economic slowdown.
“Everything I see makes me more and more optimistic that we could at least have a soft landing,” Skuterud said. We continue to see remarkably strong labor markets across the country.”
CIBC expects the central bank to justify another sharp rate hike by pointing to the historically low national unemployment rate and sustained wage growth.
“Evidence that the economy is slowing due to weaker demand, rather than supply constraints, will bring a pause in this cycle of rate hikes after the next hike,” Grantham said.