Bottom Line
- Beating market expectations, a whopping 93,200 jobs were added in June.
- The outsized gain in employment resulted in a 0.2 percentage point drop in the unemployment rate to 7.9%.
- Employment in the services sector led the advance.
- Total private sector jobs advanced by a strong 76,000—the increased share of the private sector in the June report is a positive development.
- The overall employment gain was lead by strong advances in Ontario and Quebec.
- The participation rate jumped a point to 67.4%, but average hourly wage growth slowed significantly from 2.4% to 1.7% in June.
- About 403,000 jobs have been created since the recovery started but 44% of the total has been in the broad public sector and 23% in construction.
- The employment report suggests that the Canadian economic recovery remains on track.
- Indicators on the economy continue to be mixed —May housing starts and building permits were down, but there was an apparent rebound in June auto sales after three consecutive months of decline.
- Nevertheless, in view of the slowdown in the U.S. and global economies that is currently unfolding, with significantly reduced price pressures, the outlook remains cloudy.
- In this environment, it would be prudent for the Bank of Canada to keep rates steady.
Outlook
Just when we thought there would be some slowdown or a payback for the solid string of job gains, a whopping 93,200 jobs were added to Canadian payrolls in June. Plus, Canada's employment is a touch below (down 14,400) the October 2008 peak. The second quarter average monthly gain is approximately 76,000—a very decent result.
The advance in employment outpaced the gain in the labor force, resulting in a 0.2 percentage point drop in the unemployment rate to 7.9%. While the consensus was expecting no change, we were forecasting the unemployment rate to fall to 8.0%. This is the first time the unemployment rate fell below 8% in 17 months.
June's employment gain departed from the most recent trend of public sector advances. Excluding the broad public sector (education, health care, and public administration), services payrolls expanded by almost 86,000. Within the private services sector, there were very decent gains in trade (up 21,600), business, building and other support services (up 20,000), and professional, scientific and support services (up 12,800). Although construction payrolls expanded by 11,000 in the month, the decline in manufacturing (down 14,300), coupled with losses in agriculture and utilities lead to the overall decline within the goods-producing industry of -10,200.
Regionally, Ontario and Quebec were the solid employment gainers in the month, adding 60,300 and 30,400 jobs, respectively. In both provinces the gains, again, were in the services industry. Ontario lost more manufacturing jobs in the month. Over the past three months, 36,100 manufacturing jobs have been lost in Ontario.
The participation rate jumped a point to 67.4%. The one blight on this generally upbeat report, however, was that average hourly-wage growth slowed significantly from 2.4% to 1.7% in June. This was the slowest monthly advance in seven years.
While there seems to be no stopping Canada's employment comeback, the brakes will eventually be applied as we are not seeing solid economic growth in the overall economy so far in the second quarter. The 100,000-plus job gain in April was mismatched with the no real GDP growth reading in the month. Canada's housing market is cooling and challenges for the Canadian economy are still prevalent with slowing U.S. economic growth, financial concerns over the debt crisis in Europe, and falling commodity prices weighing on the overall outlook.
By Arlene Kish and Brian Bethune