- Canada’s economy added 75k jobs in July (+0.4% m/m), well above consensus expectations for a 20k gain. The monthly details skewed towards part-time jobs (+57.9k) versus full-time (38.6k), but pulling back over the past three months shows full-time positions have grown by 193k versus a 12.1k decline in part-time roles.
- The unemployment rate fell from 6.5% in June to 6.4% in July, its lowest level in two years. The improvement came alongside a 60.5k increase in the labour force, while the labour force participation rate edged up 0.1 percentage points to 65.1%.
- Employment gains were broad-based across industries, led by wholesale and retail trade (+21k), finance, insurance, real estate, rental and leasing (+18k), professional, scientific and technical services (+17k) and construction (+16k). Offsetting some of these gains were declines in public administration (-15k) and agriculture (-9.6k).
- Wage growth moderated in July, with average hourly wages up 2.8% year-on-year, down from 3.3% in June. Average hourly earnings reached $37.17 in July.
Key Implications
- Oh boy, another strong labour market report. Beyond just the jobs gains, the fall in the unemployment rate was encouraging given hiring outpaced a sizeable 61K gain in the labour force. This shows the economy was able to absorb more labour market slack in July. When coupled with the strong bounce-back in activity in the second quarter, some additional momentum on jobs in July is nice to see.
- The labour market is showing clear signs of recovery, but the 6.4% unemployment rate continues to signal an economy operating with some slack. Together with the prospect of new tariffs coming into effect on August 19th, the downside risks to the economy remain. We continue to expect the unemployment rate to gradually decline in the coming months as the economy deals with the volatility in energy prices and potentially more trade headwinds. Given this backdrop we expect the Bank of Canada to stay on hold for the rest of the year.
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