The Canadian economy took an unexpected hit in July, losing 2,800 jobs while the unemployment rate remained steady at 6.4%, according to the latest figures from Statistics Canada. The surprising dip in employment, particularly among youth and recent immigrants, signals ongoing challenges in the job market and could prompt further interest rate cuts by the Bank of Canada.
Economists had anticipated a modest increase in employment, with predictions ranging between 15,000 to 30,000 new jobs. However, the actual figures fell short, raising concerns about the pace of economic recovery. The Bank of Canada, which recently reduced its policy rate by 25 basis points, may consider further cuts as the job market struggles to regain momentum.
Despite the overall decline in job numbers, the average hourly wage growth slightly slowed to 5.2% from June’s 5.4%. While this deceleration provides some relief, it remains above the Bank of Canada’s target, suggesting ongoing inflationary pressures.
The labor force saw a decrease in participation, with younger workers facing the brunt of the slowdown. The unemployment rate for those aged 15 to 24 reached 14.2% in July, marking the highest level since September 2012, excluding the pandemic. Recent immigrant youth faced an even more challenging landscape, with an unemployment rate of 22.8%.
Full-time employment saw a modest increase, offset by a decline in part-time work, reversing a trend observed over the past year. The private sector experienced a significant drop in employment, with 42,000 jobs lost, while the public sector saw an increase of 41,000 positions, particularly in health care and social assistance.
Despite these challenges, economists remain cautiously optimistic, noting that the Canadian economy is still growing, albeit at a slower pace. The unemployment rate has gradually risen from 5.5% a year ago, and economists predict it could peak at 6.7% by the end of the year.
As the labor market continues to cool, the Bank of Canada is likely to monitor the situation closely. Further rate cuts may be on the horizon if economic conditions do not improve. While concerns about a recession loom, some experts believe the recent market reactions are more reflective of caution rather than an imminent downturn.
