Highlights:
- Employment rose 22.2k in August following a 10.9k rise in July.
- The unemployment rate in August dropped to 6.2% from 6.3% in July.
- The employment gain was significantly skewed towards part-time employment which soared 110.4k with full-time employment plummeting 88.1k. Despite this weakness in August, earlier strong gains contributed to full-time employment averaging a solid monthly increase of 17.8k over the past year.
- Manufacturing jobs fell 11.1k in August though it was offset by relatively widespread gains in service producing jobs which increased in aggregate by 35.9k.
Our Take:
The Canadian economy continues to generate jobs with hiring in August rising to 22.2K from the 10.9k gain recorded in July. This sent the unemployment rate down to 6.2% from July’s rate of 6.3%. The employment increase over the last two months does represent a moderation from the very robust 29K average monthly increase evident over the prior twelve months. This strength in labour markets has been consistent with GDP growth rising by more than double the economy’s long-run average or potential, rate over the last four quarters ending in 2017Q2. Despite rapid tightening in both labour and product markets, inflation pressures have been largely absent with consumer price inflation remaining well below the central bank’s 2% mid-range target. However, today’s employment report is providing tentative evidence of wage pressures starting to build with the year-over-year increase in average hourly earnings rising to 1.7% in August relative to 1.2% in July and a low in April of 0.5%. This wage measure is starting to mirror the upward trend evident in Canada’s SEPH payroll employment survey where the fixed weighted wage measure was up 2.7% in June relative to a recent low at the start of the year of 1.5%. Indications of rising wage pressure provides validation of the Bank of Canada 25 basis point hike in the overnight rate to 1.00% which followed a similar increase at the policy meeting in July. Assuming continued above-potential growth and consumer price inflation starting to trend closer to the 2% target, the Bank of Canada is expected to continue to tighten with the overnight rate projected to rise to 2.00% by the end of 2018.
