Canada’s July Unemployment Rate Surges, Losing 8,000 Part-Time Jobs

In an unexpected turn, the Canadian economy saw a net loss of 6,400 jobs in July, causing the jobless rate to rise to 5.5%. This outcome has intensified speculations that the Bank of Canada might put a halt to its interest rate hike campaign.

Initially, analysts surveyed by Reuters had predicted a net gain of 21,100 jobs for July, with the unemployment rate edging up only slightly from June’s 5.4%. However, the reality painted a different picture, with 8,100 part-time jobs being shed, offsetting a small increase in full-time employment, according to Statistics Canada’s report.

Despite the rate hikes initiated by the Bank of Canada since March 2022 to cool down the economy, the labor market had shown resilience, partly due to strong immigration. The bank had raised rates in June and July to curb inflation and reach its 2% target. However, with the recent job market data, analysts like Doug Porter, the chief economist at BMO Capital Markets, suggest the bank may consider pausing its rate hike strategy.

While the headline figures indicate a slowdown, there is a silver lining in the average hourly wage for permanent employees, which rose by 5.0% from July 2022. This figure closely monitored by the Bank of Canada for signs of inflation has seen fluctuations, with an increase from June but a decrease from May and April.

Senior economist Andrew Grantham at CIBC Capital Markets pointed out that the data provided mixed messages for the central bank. The recent losses in July might not be sufficient to convince the Bank of Canada that the labor market has loosened enough to achieve its 2% CPI target sustainably.

Despite the setbacks in July, Canada’s average monthly employment growth for the year has still been positive, averaging at 22,000 jobs gained. In terms of sectors, the goods sector experienced a net loss of 27,500 positions, primarily driven by a decline in construction jobs. On the other hand, the services sector gained 21,200 jobs, with notable contributions from healthcare, social assistance, and educational services industries.