Canada job market report will hardly make the central bank change its course

Last month, Canada’s job market showed certain signs of softening. However, according to a Desjardins economist, the Bank of Canada will probably not see it as a sign that its rate-hiking cycle aimed at reducing inflation is finally working.

A recent report by Statistics Canada shows that the unemployment level was up from 5% to 5.2% in May, marking the first gain since August 2022.

The national economy lost 17,000, although employment overall almost didn’t change.

Randall Bartlett, senior director of Canadian economics at Desjardins, warns that job losses were concentrated in the segment of the youngest workers as they enter the summer jobs season. In his opinion, it is not necessarily characteristic of what is really happening in the labour market, and job losses haven’t become a tendency yet.

“We need to see how it evolves in the months ahead, and then we’ll decide what it means for monetary policy,” – Bartlett added.

The report was released days after the BoC raised its overnight rate by 0.25%  to 4.75% after receiving a string of unexpectedly hot economic data.

Wages, which the central bank has focused on as a particular concern in its inflation fight, were up by 5.1% annually.

Bartlett believes that wage growth in Canada is more “subdued” than it could seem.

He explained that StatsCan’s wage report is one of several wage indicators that the BoC looks at, and others are slowing down more quickly, which means that “wages are not the concern we had expected” when it comes to the possibility of a “wage-price spiral” some economists were afraid of.

Anyway, Bartlett expects the Bank to interpret the report as a sign that Canada’s labour market is still “very tight.”

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