The unemployment rate also rose again
Canada’s economy trimmed 1,400 jobs in June, the second time in four months the labour market has contracted as expectations of further central bank rate cuts later this year continue to grow.
Government data released on Friday showed the unemployment rate also jumped month over month by 0.2%, bringing it to 6.4% – higher than median estimates indicated by a Bloomberg poll of economists.
Wage growth defied that slowdown, with permanent employees seeing wages rise at a clip of 5.6% last month, although that pace is expected to slow amid a further labour market cooldown in the months ahead.
Odds of a second consecutive rate cut by the Bank of Canada in July jumped as a result of the latest data, with traders in overnight swaps reportedly pricing the likelihood of a move to lower rates at about 66%, compared with 55% prior to the news.
Employment was virtually unchanged in June 2024 (-1,400; -0.0%), and the unemployment rate increased 0.2 percentage points to 6.4%.
— Statistics Canada (@StatCan_eng) July 5, 2024
For more info: https://t.co/FMhHrZacnx. pic.twitter.com/AeuPF2w0VL
The increase in the national unemployment rate means it now sits at its highest level, excluding the one-off pandemic era, since October 2017 – and Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen said the prospect of a July central bank interest rate cut is certainly in play.
“The [Bank of Canada] will still be watching the next round of inflation data and their own Business Outlook Survey closely ahead of the next interest rate decision later this month,” he said in a note following the Statistics Canada release.
“But with interest rates still at restrictive levels, the bar to at least easing the monetary policy brakes further in the near-term is lower. The June labour market data increases the odds that the central bank will cut rates in July.”
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