Canadian unemployment fell a notch to a fresh historic low of 5.1% in May led by a surge in full-time hiring and wage growth pushed further above the central bank's inflation target, underscoring Governor Tiff Macklem's view more forceful rate hikes may be needed in an economy operating beyond regular capacity limits.
Employment gains quickened to 39,800 from April's 15,300 and beat a consensus forecast of a 27,500 increase. The unemployment rate dip from April's 5.2% took it further past the lowest in comparable records back to 1976 in a month where economists expected no change.
Average hourly wages for all employees, the measure tracked by the Bank of Canada, rose 3.9% in May from a year ago, faster than April's 3.3% pace. Statistics Canada also reported Friday that wages for permanent workers rose 4.5%.
Full-time employment rose 135,400 in May and part-time work declined 95,800. Services climbed about 81,000 in a broad-based gain beyond restaurants and hotels, while employment among goods industries was dragged down by a 43,200 fall in manufacturing.
Hours worked, sometimes viewed as a proxy for GDP, was little changed on the month and 5.1% higher than a year ago.
The Bank of Canada will see another jobs report before its July 13 rate decision, where investors see a rate hike of 50bps and some chance of a 75bp move. Inflation of 6.8% is the fastest in decades versus a Bank target of 2%. Macklem told reporters Thursday that curbing inflation is the number one goal and policymakers can be forceful if needed, adding that reaching a soft landing is aided by a very strong job market.