The stable employment levels reported in July may not accurately reflect the state of the Canadian labor market, as there are some concerning indicators. Most economists anticipate that these figures will prompt the Bank of Canada to implement further interest rate cuts.
Statistics Canada revealed that the national unemployment rate remained at 6.4 per cent in July, with a minimal change in total employment. A modest loss of 2,800 jobs was recorded for the month, marking the second consecutive month of job losses in the country. However, there has been an overall increase of approximately 346,000 positions compared to the previous year.
The July labor market report presented a mixed picture, with private industries cutting 42,000 jobs while the public sector added 41,000 new hires. Full-time employment saw an increase of 62,000 jobs, whereas part-time work declined by 64,000 positions.
The wholesale and retail trade sector experienced the most significant job losses, shedding 44,000 positions, followed by the finance, insurance, and real estate industry, which lost 15,000 jobs. Conversely, there were new hires in public administration, transportation, warehousing, and utilities.
Both male and female individuals aged 55-64 saw a decrease in employment, while young men aged 15-24 faced job losses. Conversely, core-aged men between 25 and 54 years old saw a notable increase in employment.
The slowdown in hiring activity among Canadian employers reflects the cooling economy, with the rising unemployment rate primarily driven by population growth rather than widespread layoffs. The labor force participation rate declined in July to 65 per cent, the lowest since June 1998, excluding pandemic-affected years.
Concerning trends in the labor market, particularly around wage growth, may lead to further interest rate cuts by the Bank of Canada. The central bank is focused on achieving two percent inflation while closely monitoring signs of a weakening labor market.
Financial institutions such as BMO and TD Bank are anticipating interest rate cuts at upcoming meetings, aligning with market expectations and reflecting concerns surrounding the economy and labor market health.
The upcoming inflation data for last month will play a significant role in shaping the Bank of Canada’s decision-making process. The recent increase in the U.S. unemployment rate has also influenced market dynamics, prompting speculation about potential interest rate cuts and causing volatility in stock and bond markets.
