Canada’s economy shed a net 24,200 jobs in July, driven by a decline in wholesale and retail trade, official data showed on Friday, as Canada’s job market remained in a holding pattern for the third consecutive month.
Statistics Canada said the unemployment rate edged up to 5.7% from 5.5% in June as more people looked for work after hitting record lows earlier this year. Analysts in a Reuters poll had predicted a gain of 12,500 jobs and an unemployment rate of 5.5%.
“Clearly it’s on the disappointing side of expectations,” said BMO Chief Economist Doug Porter. “Of course, you can never read too much into any one month but this is the third setback in employment in the past five months.”
The Canadian dollar weakened to $1.3268, or 75.37 cents U.S., following the decline in jobs.
July saw the loss of 11,600 full-time jobs and 12,600 part-time positions. Employment declined for youth aged 15 to 24 and for women in the core working ages of 25 to 54 but increased for core working age men.
Wages for permanent employees – a figure watched closely by the Bank of Canada – rose by 4.5% year-over-year, the largest gain seen since January 2009.
“At the moment it looks like the Canadian labor market has reached a limit where the unemployment limit can’t break that 5.5% – 5.4% level without wages going up,” said Simon Harvey, a FX market analyst for Monex Europe and Canada.
The number of private-sector employees, Statscan said, dropped by 69,000 in July – driven largely by declines in the wholesale and retail trade sector, which shed 20,600 jobs. Self-employment was up by 28,000 positions while the number of public-sector employees was little changed.
Canada’s construction sector saw the biggest employment boost in July, adding 25,000 jobs. Gains were also seen in the public administration industry, which posted an increase of 9,200 positions.
Canada’s central bank has remained firmly on the sidelines since October and is not expected to move for the remainder of the year – despite a recent rate cut by the U.S. Federal Reserve.
“The Bank of Canada needs to tread carefully,” Derek Holt, vice president of capital markets economics at Scotiabank, cautioned on Friday, noting Canada’s domestic data could start “to weaken in the third quarter.”
“I do think at the margin this lands pretty heavily on the side of suggesting the bank will consider trimming interest rates at some point,” BMO’s Porter told Reuters.
“Of course, we have to wait and see what actually happens on the trade front in the next few weeks, but this certainly is supportive of the doves’ view,” he said.
In a separate release, Statscan said the value of Canadian building permits declined by an unexpected 3.7% in June to C$8.01 billion ($6.06 billion) as multifamily and institutional permit values dropped.
Source: Financial Post