OTTAWA: Canada’s jobless rate inched down to a new record low after adding more jobs than expected in May, official data showed on Friday, bolstering the case for an even larger rate increase next month by the central bank.
Canada added a net 39,800 jobs in May, entirely in full-time work, beating expectations for a gain of 30,000, Statistics Canada data showed. The jobless rate dropped to 5.1%, beating predictions it would remain flat at 5.2%.
The result is likely to bolster calls for the Bank of Canada to act more aggressively at its next interest rate decision on July 13. The central bank hiked to 1.5% from 1.0% last week and said it would act “more forcefully” if needed to curb inflation.
“Certainly this does come down on the hawkish side of the ledger and it is going to add to the speculation around a potential 75-basis-point move next month,” said Andrew Kelvin, chief Canada strategist at TD Securities.
“It’s another signal to the Bank of Canada that they are a little bit behind the curve on their rate hikes.”
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Job gains were wholly in full-time work, up 135,400, offsetting a loss of 95,800 in part-time jobs. The services sector saw broad gains, led by accommodation and food services, while the goods sector lost jobs, almost all in manufacturing.
The average hourly wage of permanent employees rose 4.5%, accelerating from 3.4% April and in-line with gains seen in 2019, when the labor market was also very tight.
“When we look at hourly wages for current workers, leaping to 4.5%… We are now at the top of the range we saw in that last cycle. So it does show that very tight labor market,” said Jimmy Jean, chief economist at Desjardins Group.
Still, wage gains are not keeping pace with inflation, which hit at 31-year high at 6.8% in April and is widely expected to go higher still. U.S. inflation, also released on Friday, accelerated to 8.6% in May.
The Canadian dollar was trading 0.5% lower at 1.2759 to the greenback, or 78.38 U.S. cents, as the U.S. dollar surged against a basket of major currencies.