MNI: Canadian June Employment Gain Triples Forecast

Canadian job creation tripled economist forecasts in June, adding to evidence the central bank needs to raise interest rates again next Wednesday.

Employment rose by 59,900 last month according to a Statistics Canada report Friday from Ottawa, the largest gain since January and contrasting with some predictions the economy was stalling out. Economists predicted just 20,000 jobs and no one saw a gain anywhere near this large. The entire net job gain also came from higher-paying full-time positions that rose 109,600, while part-time work declined by 49,800, potentially signaling employers are trying harder to hold on to their workers.

The unemployment rate rose to 5.4% from 5.2%, the highest since February 2022, as more people looking for work boosted the labor force by 114,000. Economists predicted the jobless rate would remain at 5.2%. Unemployment reached a record low 4.9% last year. 

Average hourly wages rose 4.2% in June from a year ago. While that's the slowest since May 2022 and the previous gain of 5.1% Bank of Canada officials have said wage gains need to be closer to their 2% inflation target to be consistent with price stability. Hours worked were little changed in June from May and up 2% from a year ago, continuing to defy some forecasters and officials who have said a recession is looming.

Bank of Canada Governor Tiff Macklem unexpectedly raised interest rates last month, returning after eight straight hikes through January with a statement laying out a series of upside risks that could leave inflation stuck above his 2% target. 

Part of the reason unemployment climbed is likely due to record immigration and population growth, with new arrivals typically needing more time to find a job. The participation rate also climbed to 65.7% from 65.5% on the month. 

The June job gain more than overcomes the prior decline of 17,300 and means employment has climbed 470,000 over the last year or by 2.4%. That gain is impressive given what should have been a powerful drag of nine interest-rate increases. Officials have said supply and demand need to be re-balanced and while inflation will soon slow to 3% the 2% goal won't be reached until the end of next year. 

Other reports have also suggested the economy chugging along. GDP 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.