Canada’s unemployment rate reaches new record low level, while wages keep going up
In May, Canadian employers kept hiring at a significant pace amid quite a tight labor market, reducing the jobless rate to a record low and supporting a strong growth in wages.
According to Statistics Canada, the national economy added 39,800 jobs last month, outpacing the 27,500 increase expected by economists. As a result, the nation’s unemployment level was down by 0.1% to 5.1% – its lowest level since 1976.
Another important shift was from part-time employment to full-time, which is another sign of a tight labor market. In May, full-time employment rose by 135,400, while a part-time fell by 95,800.
The average hourly wage rate showed an annual increase by 3.9%, following a 3.3% hike reported in April.
Such results show how strongly Canada’s labor market is running up against maximum employment, and how it will struggle to keep growing without raising the pace of wage gains. The imbalance between demand and supply of jobs is the main reason why the central bank is tightening its monetary policy so aggressively.
The Governor Tiff Macklem has raised its key lending rate to 1.5% from 0.25% this year, and an increase to 3% is expected by October.
The Bank of Canada’s next rate meeting is scheduled for July 13, with the markets saying there’s a 50% possibility of a 0.75% rate increase this time.
Although the employment increase in May was more than double the 15,300 gain seen in April, the overall tendency is slowing significantly as employers are having troubles with finding new workers. In 2022, the employment was up by almost 264,000, compared to a gain by about 85,000 in the labor force.
The May wage gains turned out to be one of the strongest in history since the 1990s. In case we exclude the pandemic, when the crisis distorted job market data, workers showed higher wage increases briefly in 2019, and more significantly in 2007 and 2008.
Last month, wage gains for permanent workers reached 4.5%, following a 3.4% hike seen in April.