Canadian Employment (July 2022)

Canada sheds jobs in July for second straight month 

• The Canadian labour market shed 30.6k positions in July. Losses were spread among full-time (-13.1k) and part-time (-17.5k) positions. 
• Public sector employment was responsible for the bulk of the decline as it shed 51k positions. However, private sector employment also dropped (-13.8k). In contrast, self-employment jumped by 34.2k positions. 
• Even with the headline drop in employment, the was unemployment rate was unchanged at 4.9% - matching an historic low – as the labour force fell by 27k and the participation rate declined by 0.2 ppts to 64.7%. Meanwhile, the number of people unemployed long-term declined by 23k, marking the third consecutive drop.
• By industry, job losses were concentrated in the services sector, where employment fell by 53k. Losses were spread across several industries, including wholesale and retail trade (-27k), healthcare and social assistance (-22k) and educational services (-18k). In contrast, employment in the goods producing sector was up 23k in June, lifted by manufacturing (+7k) and construction (+8k).
• On a geographic basis, the bulk of the national jobs decline took place in Ontario, were employment fell by 27k positions. Elsewhere, the report noted a significant decline in PEI (-2.3k positions) and little change in all other provinces.
• Lastly, total hours worked declined 0.5% month-on-month while average hourly earnings were up 5.2% year-on-year, matching June's pace.             

Key Implications

• That's two in a row in terms of weak headline jobs prints, and employment has now averaged an 11k decline over the past three months. This is consistent with our view that economic growth will soften in the second half of the year. The details skewed to the softer end in July, as full-time employment accounted for a larger share of the overall jobs decline than in June, and hours worked also fell. The latter is particularly notable as it could signal a soft print for monthly GDP, following flat growth in May and a sub-trend gain in June (based on Statcan's preliminary estimate). 
• Taking some sting away from the report is the fact that full-time employment only modestly retraced May's huge gain in June and July, and is still-up at healthy 4.7% year-on-year. In addition, wage growth continues to be robust (which will provide some offset to household incomes from inflation).
• Although the jobs market and underlying economic growth is softening, the Bank of Canada remains determined to rein in sky-high inflation and keep expectations anchored. As such, we expect them to take their policy rate above neutral, with it ending the year at 3.25%.  

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