The Canadian labour market shed 17.3k positions in May, with full-time employment down 32.7k and part-time employment up 15.5k.
The unemployment rate rose 0.2 percentage points to 5.2% and the participation rate dropped 0.1 percentage point to 65.5%.
Employment declined in business, building and other support services (-31k) and in professional, scientific and technical services (-13k). On the positive side, employment rose in manufacturing (+13k), other services (+11k), and utilities (+4k).
Lastly, total hours worked were down 0.4% month-on-month and wages were up 5.1% year-on-year (vs 5.2% in April).
Today’s negative print ends a streak of eight months of job gains. While most of the job losses were concentrated in the younger age cohort (15-24 year-olds), the drop in full-time jobs and reduction in hours worked point to weakness under the hood. The question is now: Is this a one off or the start of a trend? The labour market had been defying gravity for months and was bound for some giveback. Our forecast implies that the massive job gains of prior months are behind us, causing the unemployment rate to rise towards 6% by the end of this year.
The Bank of Canada couldn’t have seen this coming when it decided to surprise markets with a 25 basis point rate hike on Wednesday. It decided to hike because economic/labour market growth was exhibiting stronger momentum than the Bank was anticipating. While one weak labour market report doesn’t make a trend, the BoC will be closely watching to see if other cracks start to form.