The national statistical agency has reported that Canada experienced a surprising loss of 17,000 jobs in May, resulting in an increase in the unemployment rate to 5.2 percent.
This comes after a period of strong employment growth in recent months, with approximately 400,000 new jobs created since September.
The unexpected decline in employment is noteworthy as it breaks the trend of positive job gains observed over the past several months.
The Canadian labor market had been showing signs of recovery and resilience, but the May figures indicate a setback.
The specific reasons behind the job losses in May were not mentioned in the information provided.
“After a long string of outsized gains in job growth, hiring apparently hit a rough patch in May,” said Desjardins analyst Royce Mendes.
According to Statistics Canada, most of the job losses were full-time and self-employed.
There were fewer people employed in the month in business, building and other support services (-31,000), as well in professional, scientific and technical services (-13,000), the agency said.
Employment, however, increased in manufacturing (+13,000), “other services” (+11,000) and utilities (+4,200).
Mendes commented that the total hours worked, which fell 0.4 percent in May, “looked ugly,” and that “the only decent reading for workers came in the wage numbers, which are still running at an above-five percent annual pace.”
RBC’s assistant chief economist, Nathan Janzen, pointed out that there are still more economic data releases expected before the Bank of Canada’s next interest rate announcement in July. This suggests that the central bank will likely assess the incoming data before making any further decisions regarding monetary policy.
In March, the Bank of Canada became the first major central bank to pause its aggressive monetary policy aimed at combating inflation.
However, this week, the bank resumed its tightening cycle by raising its key lending rate to 4.75 percent.
This move follows a series of consecutive rate hikes that began in June 2022, when interest rates were at a historically low level.
The decision to raise interest rates indicates the bank’s concern about rising inflationary pressures and its commitment to managing the economy’s growth and stability.
The upcoming economic data will provide further insights into the state of the Canadian economy and influence the bank’s future interest rate decisions.
“We continue to expect data releases to look softer as time goes on,” Janzen said in a research note, adding that “it will probably take more downside surprises to upend plans for another rate hike in July.”
