The Canadian job market stalled in June as the economy lost 1,400 jobs and the unemployment rate climbed to its highest level in more than two years, bolstering the case for further interest rate cuts by the Bank of Canada.
Statistics Canada said Friday the unemployment rate came in at 6.4 per cent for the month, up from 6.2% in May, as the size of the labour force grew.
The June result was the highest reading for the unemployment rate since January 2022 when it was 6.5%.
Leslie Preston, managing director and senior economist at TD Bank, said financial markets increased the odds of a rate cut by the Bank of Canada at its July 24 decision following the jobs report.
“The Bank of Canada is not out there to see Canadians lose jobs, but they do want to see, you know, slightly cooler conditions in the labour market,” Preston said.
“So this is certainly consistent with what they’re looking for.”
The central bank cut its key interest rate last month for the first time since the early days of the pandemic. The bank’s policy interest rate stands at 4.75%.
Preston said TD was still forecasting that the Bank of Canada would wait until September before cutting again, but noted there are two key data points to come before the July rate decision: the central bank’s quarterly business outlook survey and the June inflation report.
“Certainly inflation will be a big one, but I wouldn’t want to downplay the business outlook survey,” Preston said.
“That’s also a pretty important one.”
BMO chief economist Doug Porter said the jobs report drives home the point that the Canadian labour market can no longer be considered tight and is tipping in the other direction.
“We learned last week that the job vacancy rate has dropped below pre-pandemic levels, and the unemployment rate is now steadily marching higher into weak terrain,” Porter wrote in a report.
“As a stand-alone result, the softening job market raises the odds of a Bank of Canada rate cut. However, wages remain the very definition of sticky, which will give the bank pause.”
Average hourly wages among employees were up 5.4 per cent on a year-over-year basis in June.
Statistics Canada noted the unemployment rate has trended up since April 2023, rising 1.3 percentage points over that period.
It also said that as the unemployment rate has increased, so has the proportion of long-term unemployed, with 17.6% of those unemployed in June having been continuously jobless for 27 weeks or more, up four percentage points from a year earlier.
The overall loss in the number of jobs in June came as the economy lost 3,400 full-time positions, offset in part by a gain of 1,900 part-time jobs.
Statistics Canada said the number of people working in transportation and warehousing fell by 11,700, while those in public administration dropped by 8,800.
The accommodation and food services sector added 17,200 jobs and the number of those working in agriculture grew by 12,300.