In June, Canada’s economy added more jobs than expected, data showed on Friday, likely sealing the deal for the Bank of Canada to raise interest rates next week.
According to Statistics Canada data released Friday, jobs increased by 59,900 in June, the most since January, while the unemployment rate rose to 5.4% from 5.2% as more people searched for work.
According to Statscan, unemployment increased for a second consecutive month in June, reaching its highest level since February 2022, but still below a pre-pandemic 12-month average.
Until Wednesday’s announcement of the Bank of Canada’s interest rate, the June jobs report will be the last major economic figure released.
It is good enough for the bank to hike next week, said Derek Holt, vice president of capital markets economics at Scotiabank. “We still have a strong jobs market.”
Last month, the central bank raised its overnight rate to 4.75% on concerns about sticky inflation and said further moves would depend on the latest economic data.
There have been some signs of a slowdown in the past month – inflation dropping to 3.4%, jobs numbers tepid in May, and a surprise trade deficit in May – but not enough to diminish market expectations of another rate hike.
In May, the economy regained momentum after stalling in April, likely growing 0.4% after nine rate increases totaling 450 basis points.
The return to solid job growth in June should… lock in a second consecutive 25-basis-point rate increase next week as central bankers scramble to tamp down the surprisingly resilient economy and associated excess inflationary pressures,” said Desjardins Group’s head of macro strategy, Royce Mendes.
Reuters polled economists who expect the bank to raise rates by another quarter-point and then hold them through 2024.
At 75.03 U.S. cents, the Canadian dollar was trading 0.3% higher at 1.3328 to the greenback.
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In June 2022, the average hourly wage for permanent employees rose 3.9%, compared with 5.1% in May. It was the smallest increase in 14 months.
The largest employment gain since January was driven by full-time employment. Employment gains tended to be concentrated among men aged 15 to 24 and the core 25 to 54 age group, while employment among women of all ages remained relatively flat.
A net of 9,800 jobs was added in the goods sector, mostly in manufacturing, while 50,000 jobs were added in the service sector, largely in wholesale and retail trade, healthcare, and social assistance.
The report was written by Ismail Shakil and Steve Scherer in Ottawa; Additional reporting was done by Dale Smith in Ottawa; editing was done by Emelia Sithole-Matarise and Mark Porter.