Unemployment rate ticks up to 6.4%

Rising unemployment

The latest labour market data from Statistics Canada paints a mixed picture for the Canadian economy. The national jobless rate rose to 6.4% in June, a slight uptick from the 6.2% rate recorded in May. This increase came as the economy shed 1,400 jobs overall during the month, a disappointing reversal from the 27,000 positions that were added in the prior month. While the modest job losses were not as severe as some analysts had feared, the rise in the unemployment rate nonetheless signals that the labour market is starting to show signs of cooling, which is precisely what the Bank of Canada has been seeking as it navigates the tricky task of bringing down stubbornly high inflation.

Wage growth, a key metric the central bank is closely monitoring, continued to accelerate in June, with average hourly wages rising 5.4% compared to 5.1% in May. This faster-than-expected pace of wage growth will likely keep the Bank of Canada on track to deliver further interest rate hikes in the months ahead, as policymakers aim to rein in demand and bring inflation back down to their 2% target. The delicate balance the central bank must strike is slowing the economy just enough to curb price pressures, without tipping the country into a full-blown recession that could drive unemployment significantly higher. With the latest jobs report showing a mixed bag of results, the Bank of Canada will need to carefully assess the evolving labour market conditions as it determines the path forward for monetary policy in the second half of 2023.

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