Canadian Employment (June 2019)

No net new jobs created in June but wage growth surges

• Canadian employment remained broadly unchanged in June. On net, employment edged lower by 2.2k. With a steady participation rate and few new jobs created, labour force growth helped to push the unemployment rate up a tenth of a point to 5.5%. 
• The details of the report show that 24.1k full-time jobs were created in the month. However, 26.2k part-time jobs were lost, resulting in the small (statistically insignificant) decline of 2.2k jobs in June. Both private and public sector added jobs in the month, but were more than offset by a decline in self-employed.
• Service industries added all the jobs (+30.6k), with health care and social assistance, educational services, and transportation and warehousing recording strongest gains. In contrast, the goods sector lost 32.8k jobs, with about half of that loss occurring in the manufacturing sector.
• Among the provinces, employment gains were recorded in Alberta (+10.4k) and Saskatchewan (+2.5k), Quebec (+1.8k), New Brunswick (+1.1k) and PEI (+0.4k). Small employment declines were recorded in the remaining provinces.
• Wage growth for permanent employees surged to 3.6% year-on-year in June from 2.6% pace in the preceding two months.

Key Implications

• No new jobs were created in June, but the surge in wage growth is sure to catch the attention of the Bank of Canada. One of the issues puzzling policymakers over the last few years has been the lack of pickup in wage growth despite historically low unemployment rates. In Canada, oil industry woes has been blamed for depressing national wage growth. With the June data this no longer seems to be a factor. Moreover, favourable base year effects (i.e. flat wage growth in the second half of 2018) should help keep wage growth buoyant near current levels in the second half of this year.
• With inflation at target, low unemployment, and wage gains more in line with expectations of policymakers at this point in the cycle, there is little motivation for the Bank of Canada to change course. Unlike our southern neighbour, interest rate "insurance" cuts remain unlikely this year. That said, the prolonged period of elevated trade policy uncertainty may keep the Bank of Canada from considering moving rates higher even if the data continues to prove modestly stronger than expected.

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