Bank of Canada can justify another hike this year with latest jobs beat: Tal
Canada’s jobless rate returned to four-decade lows in July on stronger-than-expected employment gains, adding to evidence the nation’s economy continues to power ahead.
The unemployment rate declined to 5.8 per cent from 6 per cent in June, matching the lowest level since the 1970s, Statistics Canada reported Friday from Ottawa. The economy added 54,100 jobs, marking a second straight month of exceptionally strong labour market gains.
"In the wacky world of Canada's monthly employment numbers, July came up with another head scratcher, with some big headlines but some disappointments in the fine print," Avery Shenfeld, chief economist at CIBC Capital Markets, wrote in a note to clients.
The breakdown was less rosy in July -- all the gains were part-time and concentrated in public sector service jobs -- the report is consistent with a robust economy that continues to generate jobs at a steady pace and looks to be running up against capacity. Canada’s economy has added more than 600,000 new jobs over the past two years -- most of them full-time -- raising concerns the nation’s tightening jobs market is running out of room to grow much further.
The jobs report follows a string of other data in recent weeks that shows Canada’s economy remains strong but may soon run up against capacity constraints. The Bank of Canada has already raised interest rates four times since last year to cool growth and keep inflation in check, and is expected to hike borrowing costs at least once more this year.
“The labour market remains robust and there is easily enough here to convince the Bank of Canada to maintain its gradual tightening campaign,” Doug Porter, chief economist at Bank of Montreal, said in a note to investors.
Friday’s report -- which is based on a survey of households -- may provide some comfort that tightening is happening at a gradual pace. Wage gains slowed during the month, with average hourly wages up 3.2 per cent from a year ago. That’s the slowest pace since February. Wage gains for permanent workers were 3 per cent, the slowest this year.
While the monthly employment gains were the strongest this year, total actual hours worked was up just 1.3 per cent in July, the lowest since November 2017. That’s because the gains last month were all part-time, up 82,000 in July. Full-time employment fell by 28,000.
Another weak point in the monthly jobs data was a 36,500 drop in goods-producing industries, including a net decline of 18,400 in manufacturing. All the employment gains were in services, which was up 90,500 during the month. That’s the biggest monthly increase in service jobs since at least 1976 and reflects higher employment in education and health, particularly in Ontario.
The Canadian dollar didn’t move much after the report, trading 0.3 per cent lower at $1.3101 per U.S. dollar at 9:56 a.m. in Toronto. Economists had expected employment would increase by 17,000 in July, and the jobless rate would fall to 5.9 per cent.
“Overall, still a good set of numbers that will keep markets guessing between a September and October (our pick) hike by the Bank of Canada, but there are lots of reasons to question just how good the data really are here,” Shenfeld said.
--With assistance from Erik Hertzberg,Greg Quinn and files from BNN Bloomberg