Canada’s unemployment rate rose to 5.4 per cent in August, according to Statistics Canada, marking some initial relief from a historically tight job market. Economists say it’s also a signal that interest rate hikes are “beginning to bite.”
The latest Labour Force Survey (LFS) data showed the country shed 40,000 jobs last month. A slight uptick of 37,500 new part-time jobs was more than offset by a decline of 77,000 full-time positions.
Losses were concentrated in the education sector (50,000 jobs lost) and construction industry (28,000 jobs lost).
British Columbia felt the heaviest losses with 28,000 fewer jobs, and Manitoba and Nova Scotia reported downturns as well. Quebec gained 27,000 jobs, meanwhile, and employment was flat in Ontario.
Average hourly wages in August were up 5.4 per cent compared with a year ago. BMO chief economist Doug Porter said in a note Friday morning that this was the fastest annual pace for wage growth since the series began 25 years ago.
The unemployment rate in July was 4.9 per cent, the lowest on record with comparable data going back to 1976.
This marks the first time Canada’s unemployment rate has risen in seven months, marking some initial relief for the country’s tight jobs market. The Bank of Canada has aggressively been hiking its benchmark interest rate to cool the economy, a move that risks impacts on the country’s labour force.
While the August LFS was Canada’s third-consecutive monthly decline in employment, Porter said these losses can’t be pinned to the lack of available workers; Canada’s overall labour force expanded by 66,000 people in August and the participation rate ticked up slightly to 64.8 per cent.
While education jobs could recover in September, Porter pointed to losses in construction, especially, as “a clear indication that rate hikes are beginning to bite.”
Tu Nguyen, an economist with RSM Canada, said in a statement Friday that the concentration of job losses in the August LFS could be a hint that any possible recession might be sector-specific rather than broad-based: “Certain areas will get hurt substantially more than others,” she said.
The Bank of Canada signalled after its latest interest rate increase on Wednesday that more hikes would be needed to tackle inflation and cool the red-hot economy, but CIBC senior economist Andrew Grantham said Friday’s jobs report might give the bank’s policymakers pause.
“Overall, the weak headline figures may have the Bank of Canada questioning its apparent commitment to even higher interest rates,” he wrote in a note Friday morning.
TD Bank senior economist James Orlando said Canadians shouldn’t be worried seeing the unemployment rate tick up, as this slowdown is necessary to keep high inflation from becoming “entrenched.”
“The labour market is coming from levels of extreme tightness and has been due for some giveback. This is exactly what is currently playing out,” he wrote Friday.
— with files from The Canadian Press
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