Rate of Unemployment Rises in Canada.

With wage growth accelerating, Canada's unemployment rate increased to a more than two-year high in May, according to data released on Friday, June 7. These findings provide two different signals about how the Bank of Canada will interpret the data for its upcoming rate decision in July.

According to Statistics Canada, employers nationwide gained 26,700 jobs in May compared to April, while the unemployment rate increased by 0.1 percentage points to 6.2%, the highest level since January 2022. Although the hiring pace was marginally faster than anticipated—by 22,500 jobs—it still comes after a 90,400 increase in employment in the previous month.

All of the hiring in May was done for part-time jobs. Applying the criteria of the U.S. Labour Department, Canada's unemployment rate increased by 0.1 percentage points to 5.2%. For a mixed picture of America's labour market, however, U.S. job creation blasted beyond predictions even as the unemployment rate increased to 4%.

 

Even though employers have been hiring more people, the unemployment rate in Canada has been trending higher for a little over a year. Since April 2023, it has increased by 1.1 percentage points. Canada created 402,300 more employment in May than it did a year earlier, but immigration-driven population growth—nearly 100,000 more people were added to the country's total in May alone—has surpassed this strength. The percentage of people in the working age group who are employed, or the employment rate, decreased by 0.1 percentage points to 61.3% in April.

About 1.4 million people were unemployed in the nation last month, up 2.1% from April. There was also an increase in the number of jobless persons who had been unemployed for 27 weeks or longer, and a decrease in the percentage of those who had found employment in May compared to before the pandemic, which could be signs that it is becoming harder for Canadians to find employment.

Since the Bank of Canada became the first central bank within the Group of Seven to lower its policy interest rate this week, the overall sluggish job data signals a low threshold for the bank to explore further loosening monetary policy. Nonetheless, officials are sure to take notice if wage growth picks back up.

Although it was more sluggish than the central bank and economists had anticipated, economic growth rebounded in the first quarter of the year. In April, Canada's consumer price index dropped to 2.7%, the lowest level in three years.

Even still, incomes are still growing faster than headline inflation. In May, permanent employees' average hourly wages increased by the most since January, by 5.2% over the previous year, exceeding the 4.7% gain analysts had predicted. The resumption of the pace follows indications in previous months that it was slowing down, particularly in statistics from different payroll sources.