Canada’s unemployment rate crept up 0.1 percentage points in June to 6.2% as the economy lost about 5,000 jobs.

Statistics Canada said today that gains in part-time employment last month largely offset declines in full-time work.

The job report was weaker than economists had been expecting. Economists forecast of an addition of 6,500 jobs for the month.

StatsCan said the only industry with a notable increase in employment last month was professional, scientific and technical services, with monthly gains totalling 37,000 jobs.

The trade sector added 12,900 jobs, while the information, culture and recreation sector gained 10,100 workers.

Industries losing jobs in June included: business; health care and social assistance; building and other support services; and construction.

Employment for June in the manufacturing sector was essentially flat.

StatsCan noted the unemployment rate is still among the lowest in 30 years. Over the past 12 months, employment in Canada has grown by 1.7% or 290,000.

Economists on Bay Street say today’s jobs report suggest that the employment outlook for Canada has finally turned — as a result, they expect the Bank of Canada to refrain from raising interest rates at its next meeting.

TD Economics notes that, after several months of above consensus growth, the labour market finally wavered in June and shed 5,000 jobs. “The headline number hides a considerable loss of 39,000 full-time jobs, offset by a gain of 35,000 part-time. Full-time job losses have now occurred in three of the last four months,” it notes, adding, “The move away from full-time work in favor of part-time is consistent with a slowing labour market and signals that more labour market weakness is likely still ahead of us. The softer job picture was enough to push the unemployment rate up 0.1 percentage points to 6.2%.”

The regional picture tells a more troubling story, TD adds, as Ontario shed 27,000 jobs, its largest monthly loss since April of 2003, pushing the unemployment rate in the province up to 6.7%.

“Overall, June’s employment report shows a labour market that is moving closer in-line with the slowing economic growth picture. Job growth is a lagging indicator and the contraction experienced in the first quarter of this year is now showing up in the job numbers. Looking forward, we continue to expect the job market to underperform, particularly in Central Canada,” TD concludes.

BMO Capital Markets says, “Reality may finally be catching up with the Canadian job market. We wouldn’t make too much of a one-month dip in employment — that can happen even in the middle of a boom. However, the jobless rate continues to gradually grind higher — now up 0.4 percentage points since its three-decade low at the start of the year –while full-time employment growth is clearly fading.”

CIBC World Markets adds that markets were expecting a soft report, but they were disappointed by an even weaker outcome. “We’re looking for further months of soft or declining employment,” it says.

“The slow slackening in the labour market may start to take some of the steam out of wages, which would be a moderate relief to the Bank of Canada’s inflation concerns. The Bank was anticipating slow growth this year, and these figures are hardly shockingly weak, so it won’t do much to alter their bigger view,” BMO notes.

With this possible easing of inflation concerns, economists think that the Bank will likely hold the line on rates. “For the Bank of Canada, this makes the decision to leave interest rates on hold a bit easier — an action that we continue to expect when the Bank meets early next week,” TD says.

“This report will likely not change the Bank of Canada’s position of staying put on interest rates for now, given the downside risks to the economy and the upside risks to inflation as demonstrated by an elevated wage inflation,” CIBC predicts.

“On balance, Canada’s economy is set to continue to grow at a sub-potential pace in the quarters ahead. Today’s weaker-than-expected jobs report and the trade balance numbers set the stage for the Bank of Canada to hold the policy rate steady at next week’s rate setting meeting despite policymakers’ growing concerns about the near-term inflation outlook,” agrees RBC Economics.

National Bank Financial is also expecting the Bank to keep its target rate unchanged at its next rate setting meeting, although it says that the tone could be more hawkish “given average hourly wages have risen by 4.4% over the last 12 months, compared to 2.2% for the CPI.”