The Canadian economy brushed aside uncertainty over tariffs and created the highest number of jobs in six months, with the unemployment rate dipping for the first time since January.
Job Growth Surpasses Expectations in June
Hiring increased by 83,100 jobs in June, while the unemployment rate declined 0.1 percentage points to 6.9%, Statistics Canada reported Friday. Both figures significantly surpassed even the most hopeful estimate in a Bloomberg survey of economists. Part-time employment accounted for 84% of last month’s job growth, though.
First Job Surge in Five Months Halts Unemployment Rise
June was the initial month in five months that the economy added sufficient employment to hold off rising unemployment, following months of lukewarm gains and losses. Meanwhile, Canada also created a net of 143,800 jobs during the previous six months, the weakest first-half year rate since 2018, absent the pandemic, with an average of 24,000 job increases per month.
The loonie cut losses following the report to exchange at C$1.3668 per US dollar as of 8:49 a.m in Ottawa. Canadian yields rose to day’s high after the data.
Interest Rate Outlook Depends on Economic Adjustment
The central bank has kept interest rates at 2.75% over the last two meetings and their trajectory going forward will depend significantly on how the economy and inflation is able to adjust to tariffs and trade uncertainty. Although the economy is projected to slow in the second quarter, tight inflation is something policymakers will still have to worry about, as they again set rates on July 30.
Overnight swap traders reduced hopes of loosening at that gathering, sending the chances of quarter percentage point reduction to around 15%, down from 30% prior to the release.
Economists Say Job Report Weakens Case for Rate Cut
“While the unemployment rate is still elevated, the strength in other measures in this report clearly diminishes the odds of a Bank of Canada cut in July,” Katherine Judge, an economist with Canadian Imperial Bank of Commerce, wrote in a report to investors.
Up until now, the data indicate the effect of the trade war on Canadian employment has not yet spilled over to the broader economy beyond industries most sensitive to US demand. But there are new threats lurking: On Thursday, President Donald Trump declared imports into the US from Canada would be hit with a 35% levies beginning on August 1, on top of existing tariffs on auto, steel and aluminum products.
Tariff Effects Evident in Auto Hub Windsor
There are already definite indications of tariff harm in those industries: In the auto manufacturing hub of the country, Windsor, Ontario, the jobless rate is up 2.1 percentage points in January at 11.2% last month, the highest of major Canadian cities.
There were 1.6 million unemployed individuals in June, 9% more than a year earlier. Individuals are having more trouble finding work, and more than one in five had been looking for work for 27 weeks or more, the statistics agency reported. The layoff rate in June was flat.
Employment Rate and Sector-Wise Breakdown
The job rate the proportion of the working-age population that’s working increased 0.1 percentage points to 60.9% in June. The private sector added 47,000 jobs and the public sectors gained 23,000 jobs.
Wholesale and retail trade employment was up by 34,000 last month. Health care and social assistance, professional services and manufacturing also recorded some of the largest increases. Agriculture was the sole industry that recorded a significant employment decrease.
Hours Worked and Provincial Trends
Hours worked increased 0.5% in June, and were higher by 1.6% compared with a year ago.
Work increased in Ontario, Quebec, Alberta and Manitoba, but declined in Newfoundland and Labrador and Nova Scotia.
Annual pay growth for permanent staff slowed to 3.2%, against economist forecasts for the pay remaining at 3.5%.
