Canada Logs Two Different Job Trends

Job trends in Canada show employment gains picking up steam in the goods sector while they are slowing down in the services sector. However, much of that comes from the changes in the month of June where services jobs fell by 75,700 and goods sector jobs rose by 32,500 after two months of declining.

Service sector jobs declined by 76 thousand in June after logging solid gains in the previous two months. Service sector jobs show gains over three months, six months, and 12 months. Goods sector jobs show a decline over three months with gains over six months and 12 months. This month's drop is only the third service sector job decline in the last 14 months. The goods sector is coming off back-to-back declines that are its first back-to-back declines since mid-2021 when COVID was still a factor and when the sector experienced five monthly declines in a row.

Over 12 months, employment is up by 4.2% led by a 4.4% gain in the services sector with goods sector employment up by 3.7%. Over the broad 12-month period, both sectors are showing solid job growth.

Canada's unemployment rate fell to 4.9% in June from 5.1% in May, despite the decline in employment as there were fewer people seeking employment. The unemployment rate has fallen by 2.7 percentage points over the last 12 months. And over the last 12 months, the labor force participation rate has edged lower by 0.1 percentage points creating a minor tail wind for the unemployment rate to improve.

Job gains have been especially rapid in construction, where jobs are up by 8% over 12 months. Despite some increases in interest rates, construction jobs increased by 23,000 in June after several months of showing job declines.

Service sector jobs showed the strongest 12-month growth in information and culture followed by accommodation & food services, public administration, and professional & technical jobs. The category of “other" is the only major jobs category in services that shows job declines over 12 months. In the goods sector, agriculture shows a net decline over 12 months along with forestry and mining.

Canada's unemployment rate is on a cycle low. In fact, it's recovery from the COVID spike in unemployment has left the unemployment rate well below where it had been before the onset of COVID. At the same time, inflation remains quite high and stubborn setting the stage for more increases and interest rates from the Bank of Canada. With the unemployment rate falling so low and inflation continuing to accelerate, attention also has begun to attach to the prospects for a 75-basis point rate hike at the next meeting of the central bank.

Employment levels in Canada have risen above their pre-COVID peak and stayed there for eight months running; jobs continue to make gains versus that benchmark. And despite ongoing employment gains, as well as a lower unemployment rate than what had existed prior to the onset of COVID, employment continues to lag below the extrapolated trend that was set before COVID struck. The labor force participation rate in Canada it's about 0.7 percentage points below where it had been before COVID. The lower participation rate tends to reinforce a lower rate of unemployment as it causes the job market to be tighter by reducing the proportion of the population that is seeking employment and competing for jobs.

Canada continues to fit into that same mold of other G7 countries. It is showing solid economic expansion. It is making progress on the unemployment front - substantial progress and has produced stellar results. However, on the inflation front inflation remains too high and the Bank of Canada, like most other G7 central banks, is chasing after inflation and trying to put the toothpaste back in the tube. Despite the decline in jobs in this June report, Canada's job market is still quite tight, and the Bank of Canada looks like it's on a track for continued rate hikes as inflation continues to outdistance its target.