The unemployment rate in Canada increased to 5.2 percent in May as the country lost 17,000 jobs, according to the national statistical agency. This unexpected decline in employment comes after a period of strong job growth in previous months, with approximately 400,000 new jobs created since September of last year.
Desjardins analyst Royce Mendes noted that May marked a rough patch for hiring, following a series of significant job gains. The majority of job losses were in the full-time and self-employed sectors. The areas most affected by employment decline were business, building, and other support services (with a loss of 31,000 jobs) and professional, scientific, and technical services (with a loss of 13,000 jobs). However, there was an increase in employment in manufacturing (+13,000 jobs), “other services” (+11,000 jobs), and utilities (+4,200 jobs).
Mendes further observed that the total hours worked decreased by 0.4 percent in May, which he described as an unfavorable development. However, wage numbers remained positive, maintaining an annual growth rate above five percent.
RBC assistant chief economist Nathan Janzen pointed out that additional economic data is yet to be released before the next interest rate announcement scheduled for July. The Bank of Canada recently increased its key lending rate to 4.75 percent, after pausing its aggressive monetary policy in March to combat inflation. The central bank had initiated a series of consecutive rate hikes starting in June 2022 when interest rates were at a record low.
Janzen anticipates that future data releases may show softer economic conditions, but he believes that further downward surprises would likely be necessary to disrupt plans for another rate hike in July.