| Consensus | Actual | Previous | |
|---|---|---|---|
| Employment - M/M | 20,500 | -17,300 | 41,400 |
| Unemployment Rate | 5.1% | 5.2% | 5.0% |
Highlights
Canada's labour market showed signs of easing in May, as the economy shed 17,300 jobs, compared with Econoday's consensus of a 20,500 increase. The unemployment rate moved up to 5.2 percent from 5.0 percent, above Econoday's consensus of 5.1 percent and the first increase since August 2022.
Average hourly wage gains were still robust at 5.1 percent year-over-year, but slowed from 5.2 percent in April. Hours worked fell 0.4 percent on the month, all pointing to easing pressures, especially with job losses led by full-time employment. The latter contracted 32,700 in May, while part-time was up 15,500. The rise in the unemployment rate occurred despite a decline in the participation rate to 65.5 percent from 65.6 percent, further adding to the weakening situation in May.
Employment in the private sector increased 12,500 over the month, while it was up 9,700 in the public sector. The number of employees rose 22,200 while self-employment fell 39,600.
The monthly employment decline was concentrated in services, which shed 40,100 positions, while goods-producing industries created 22,800 jobs, led by a 12,900 gain in manufacturing. All major goods industries added jobs in May.
Within services, job losses were concentrated in five sectors: business, building and other support services (down 31,100), professional, scientific and technical services (down 13,400), wholesale and retail trade (down 12,900), transportation and warehousing (down 9,700), and finance, insurance, real estate, rental and leasing (down 3,300). The largest gains were in"other services" (11,000) and accommodation and food (10,600).
Today's weaker-than-expected report is a welcome development for the Bank of Canada. Yet it will take more to reassure the central bank that this is more than a one-time occurrence for this volatile report, especially with Econoday Consensus Divergence Index, at 39, still pointing to an economy performing appreciably stronger than expected, consistent with building tightening risk.
In its June 7 policy statement that explained a 25 basis point rate hike to 4.75 percent earlier this week, the Bank of Canada stressed persistent inflation and excess demand, as well as a tight labour market. It will keep a close eye on wage growth as it"remains resolute" in its commitment to rein in inflation.
Average hourly wage gains were still robust at 5.1 percent year-over-year, but slowed from 5.2 percent in April. Hours worked fell 0.4 percent on the month, all pointing to easing pressures, especially with job losses led by full-time employment. The latter contracted 32,700 in May, while part-time was up 15,500. The rise in the unemployment rate occurred despite a decline in the participation rate to 65.5 percent from 65.6 percent, further adding to the weakening situation in May.
Employment in the private sector increased 12,500 over the month, while it was up 9,700 in the public sector. The number of employees rose 22,200 while self-employment fell 39,600.
The monthly employment decline was concentrated in services, which shed 40,100 positions, while goods-producing industries created 22,800 jobs, led by a 12,900 gain in manufacturing. All major goods industries added jobs in May.
Within services, job losses were concentrated in five sectors: business, building and other support services (down 31,100), professional, scientific and technical services (down 13,400), wholesale and retail trade (down 12,900), transportation and warehousing (down 9,700), and finance, insurance, real estate, rental and leasing (down 3,300). The largest gains were in"other services" (11,000) and accommodation and food (10,600).
Today's weaker-than-expected report is a welcome development for the Bank of Canada. Yet it will take more to reassure the central bank that this is more than a one-time occurrence for this volatile report, especially with Econoday Consensus Divergence Index, at 39, still pointing to an economy performing appreciably stronger than expected, consistent with building tightening risk.
In its June 7 policy statement that explained a 25 basis point rate hike to 4.75 percent earlier this week, the Bank of Canada stressed persistent inflation and excess demand, as well as a tight labour market. It will keep a close eye on wage growth as it"remains resolute" in its commitment to rein in inflation.
Market Consensus Before Announcement
Employment in May is expected to rise 20,500 versus April's much stronger-than-expected 41,400 climb. May's unemployment rate is expected to rise 1 tenth to 5.1 percent.
Definition
The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labor force.
Description
As in the U.S., this report is used as an indicator of the health of the domestic economy. Employment trends and break-downs by industry groups highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.
The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
