Canadian employers continued to contract at a strong pace last month in an increasingly tight labor market, which reduced the unemployment rate to an all-time low and pushed for a sharp acceleration in earnings.
The economy added 39,800 jobs in May, Statistics Canada reported on Friday, surpassing economists’ 27,500 gain. The country’s unemployment rate fell to 5.1 percent from 5.2 percent, bringing it to a 1976 low.
Masking the overall gain of new net jobs meant a massive shift from part-time to full-time employment, another sign of a tight labor market. Full-time employment rose by 135,400, and part-time employment fell by 95,800.
The average hourly wage rose 3.9% from a year ago, an acceleration from 3.3% in April.
The figures illustrate the extent to which the country’s labor market is facing maximum employment, and will struggle to grow even more without further fueling wage gains. The imbalance between employment demand and supply is one of the main reasons why the Bank of Canada is tightening its monetary policy so aggressively.
TARIFF ROUTE
Officials led by Gov. Tiff Macklem have raised the key policy rate to 1.5 percent from 0.25 percent earlier this year, and are expected to rapidly raise borrowing costs to three percent. one hundred in October.
The Bank of Canada’s next decision will be released on July 13, and money market traders have a 50 to 50 chance for the central bank to accelerate its tightening and increase 0.75 percentage points next month.
“Solid data and a strong earnings figure may increase investors’ chances of a 75 basis point move by the Bank at its next meeting,” said Andrew Grantham, an economist at the Canadian Imperial Bank of Commerce. , in a report to investors.
The Canadian government’s two-year bond yields rose about 5.5 basis points from pre-launch to 3.133 percent at 9:59 a.m. Ottawa time. The Canadian dollar changed shortly after the report.
Most of the new earnings come from the unemployment ranks, with an active population growth of only 11,800 during the month.
While employment growth in May more than doubled from the 15,300 increase in April, the general trend is slowing sharply as employers struggle to find new workers. Employment has increased by about 264,000 this year, compared to an increase of about 85,000 in the active population.
Canada’s economy has added more than a million jobs in the last year, with employment nearly half a million above February 2020 levels.
The unemployment rate, based on US methodology, was 4.1% in Canada in May, compared to 3.6% south of the border.
Hours worked varied little in May, the statistics agency said. The overall increase in employment was concentrated in the retail and wholesale trade sector.
May pay rises were among the strongest on record dating back to the 1990s. Outside of the pandemic, when the crisis distorted labor market data, workers earned wage increases briefly in 2019 and more sustainably in 2007 and 2008.
Wages for permanent workers reached 4.5%, up from 3.4% in April.