Signs of economic softening grow as job creation lags population growth

OTTAWA –

Canada’s labour market is softening because the unemployment fee rises for a 3rd consecutive month, providing some proof the economic system is lastly slowing down.

Statistics Canada reported Friday employment was little modified in July, falling by 6,400 jobs. Meanwhile, the unemployment fee ticked as much as 5.5 per cent because the economic system struggles to create sufficient jobs to match the tempo of inhabitants development.

The federal company says job losses final month have been led by the development business, whereas the best job features have been made in well being care and social help.

May served as a turning level within the labour market: the unemployment fee rose for the primary time in 9 months. Prior to that, the unemployment fee was hovering at 5 per cent, simply above the all-time low of 4.9 per cent reached final summer season.

As Canada’s inhabitants continues to develop quickly, rising unemployment alerts the economic system is not creating sufficient jobs to soak up a bigger workforce.

“We’ve seen a consistent increase in the number of people without a job in Canada, but people that are still in the labour force,” stated James Orlando, TD’s director of economics.

Job vacancies have additionally declined within the nation, providing one other signal that the labour market is loosening.

Orlando says excessive inhabitants development helps the economic system keep afloat as newcomers add to demand. So as a substitute of excessive rates of interest resulting in outright job losses, Orlando says the unemployment fee is rising.

“When people come to Canada, even if they don’t get a job right away, they’re consumers, right? They’re looking for housing, they need to buy food, they need to buy clothes. And so they’re buying stuff within the economy. And that is a demand shock,” Orlando stated.

“It’s putting a floor under the economy at a time when most people would have thought it would be contracting.”

The Canadian economic system has outperformed expectations this 12 months, pushing the Bank of Canada to lift rates of interest once more in each June and July.

By elevating the price of borrowing for customers and companies, the central financial institution is hoping the economic system will gradual sufficient to carry inflation again to its two per cent goal.

With the central financial institution’s key rate of interest now sitting at 5 per cent — the best it has been since 2001 — all eyes are on what it chooses to do in September.

Orlando says the financial outlooks suggests the Bank of Canada does not want to lift rates of interest once more subsequent month.

TD’s up to date forecasts counsel the economic system will proceed to gradual, pushing up the unemployment fee to six.5 per cent within the fourth quarter of 2024.

“Every single day that goes by, more and more people are going to be impacted by the rising cost of housing, specifically on rising mortgage rates, and so it’s going to force a lot of people to adjust their spending habits,” Orlando stated.

BMO’s chief economist, Douglas Porter additionally agrees that the possibilities of a fee hike in September are falling.

“The soft July employment report is just the latest arrow in the quiver of signs that the economy is losing momentum. Along with the recent friendly CPI result, we believe that the case for the Bank of Canada moving to the sidelines is now very strong,” Porter wrote in a shopper notice.

But with underlying value pressures and wage development nonetheless excessive, Porter stated charges could have to remain excessive for lengthy.

Inflation in June fell to 2.8 per cent, inside the Bank of Canada’s goal vary of 1 to a few per cent. But core measures of inflation which strip out volatility present costs are nonetheless rising shortly and new forecasts from the central financial institution counsel it expects inflation to get again to 2 per cent by mid-2025.

The central financial institution has additionally raised issues concerning the tempo of wage development, noting fast wage features would make it difficult to get inflation again to focus on.

But Orlando says wage development is a “lagging indicator,” that means employees are getting wage will increase to mirror the fast rise of inflation that already occurred. But falling job vacancies and rising unemployment counsel excessive wage development will not persist.

“These are the best indicators that you’re not going to get keep wages growing at this five per cent level going forward or into perpetuity, they’re going to ease based on the fact that the labour market is clearly loosening,” Orlando stated.

A fast take a look at Canada’s July employment (numbers from the earlier month in brackets):

• 
  Unemployment fee: 5.5 per cent (5.4)
• 
  Employment fee: 62.0 per cent (62.2)
• 
  Participation fee: 65.6 per cent (65.7)
• 
  Number unemployed: 1,166,800 (1,147,100)
• 
  Number working: 20,166,400 (20,172,800)
• 
  Youth (15-24 years) unemployment fee: 10.2 per cent (11.5)
• 
  Men (25 plus) unemployment fee: 4.6 per cent (4.4)
• 
  Women (25 plus) unemployment fee: 4.8 per cent (4.4)

Here’s a fast look at unemployment charges for July, by province:

• 
  Newfoundland and Labrador 8.7 per cent (8.8)
• 
  Prince Edward Island 8.1 per cent (8.2)
• 
  Nova Scotia 7.7 per cent (6.4)
• 
  New Brunswick 6.2 per cent (6.4)
• 
  Quebec 4.5 per cent (4.4)
• 
  Ontario 5.6 per cent (5.7)
• 
  Manitoba 4.9 per cent (4.3)
• 
  Saskatchewan 5.1 per cent (4.7)
• 
  Alberta 6.1 per cent (5.7)
• 
  British Columbia 5.4 per cent (5.6)