Canada’s jobless rate falls slightly in June for wrong reasons; unlikely to impact BoC’s rate decision

Employment in Canada was nearly unchanged in June. The jobless rate declined 0.1 percentage points to 6.8 percent, given that fewer people were searching for work. Delving into details of the job report, it does not provide encouraging data as a drop of 40.1K net full-time positions was countered by a net gain of 39.4K in part-time work.

Furthermore, the overall fall can be attributed to a decline in employees in both the public and private sectors, countered by an increase in self-employment.

Usually a fall in a nation’s jobless rate is considered a good thing; however, this is not the case for Canada in June, said TD Economics. Underneath the zero change in hiring are weaker details, with a huge decline in full-time work resulting in a -0.4 percent move in overall hours worked.

Along with decline in employees in public and private sector, the participation rate also continued to fall. The size of the labor force fell for the third straight month. None of these details imply a strong labor market.

However, on a six-month trend basis, employment growth appears to be stronger at +7,000 jobs, said TD Economics in a research report. The hints given by the declining participation rates are quite worrisome. The rates might indicate towards discouraged individuals, especially in the core age of 25-54.

Even if June’s report might be worrisome, it is quite early to come to any firm conclusions about the trend in Canada’s labor market, added TD Economics. The June’s labor report is expected to have very little effect on the Bank of Canada’s decision on July 13, where the central bank is likely to keep its rate on hold at 0.5 percent, according to TD Economics.

Industry wise, the goods-producing industries registered a huge decline in employment. Construction and manufacturing recorded particular weakness, where employment fell 28.7K and 12.9K respectively – reversing previous month’s gains. Service industries were stronger, with notable net employment increases registered in accommodation and food services, and information, culture and recreation.

Region wise, British Columbia was the exceptional province to have registered increases in employment in June, where it rose 16K, keeping the jobless rate unchanged at 5.9 percent. Most of the other provinces registered little change in employment in June.