MNI: Canada Has First Job Decline in Nine Months, Wages Top 5%

Canada lost jobs for the first time in nine months in May, a surprise decline led by youth and service workers, though wage gains of 5.1% still signal a tight job market in the face of higher interest rates.

The unemployment rate rose to 5.2% from April's 5%, Statistics Canada said Friday from Ottawa. Economists predicted 5.1% unemployment and 25,000 new jobs. The unemployment rate remains near the record low of 4.9%.

The Bank of Canada raised interest rates Wednesday citing a labor market that remains tight even after its previous eight consecutive hikes through January, and an overheated economy that may keep inflation stuck well above its 2% target. Officials have also said 5% wage gains are inconsistent with price stability, which suggests the job loss by itself won't derail the Bank's newfound hawkishness.

The margin of error in Statistics Canada’s polling for employment is 31,000, meaning the specific job shift reported today isn’t significantly different from zero.

Job losses were dominated a decline of about 77,000 among workers aged less than 25, while it rose about 63,000 among those aged 25 to 54. Service industry employment also declined after a series of gains, a potential sign of relief for stubborn price gains in that sector. 

Full-time positions fell 32,700 while part-time gained 15,500. Hours worked, viewed as a proxy for GDP, fell 0.4% in May but were up 2.2% on a year-over-year basis.

Canada’s has reported the economy grew at a 3.1% annualized pace in Q1 – faster than the BOC’s 2.3% prediction -- and perhaps another 1% in Q2 based on a flash April figure. The last inflation report unexpectedly quickened to 4.4% from 4.3% in April.