A slowdown in Canada’s labour market has sent the unemployment rate up… and could bring inflation down.
Driving the news: New data shows job growth flatlining in July. But if you consider that Canada’s population grew by 81,900 in the same time period, it means labour markets are softening even more significantly under the surface, according to RBC Economics.
Meanwhile, the unemployment rose for a third consecutive month, to 5.5%, which means not all new workers entering the labour force have actually found work yet.
Why it matters: Central bankers are taking in the summer economic data to decide whether or not the current 5% key interest rate is adequately taming inflation. If not, they’ll hike again next month. Slowing growth in the job market in is a point in favour of holding rates steady.
- Wage growth, a sign of inflationary pressure, was still stronger than anticipated—but higher unemployment rates mean underlying pressures to raise wages are easing.
Zoom out: Other countries are monitoring Canada’s immigration growth and its effects on the labour market. But as of June, 10% of employment gains went to those who’ve been in Canada for less than 5 years, while those in Canada between 5-10 years saw losses of 8%.
In the same period starting at the end of 2021, 84% of employment gains have gone to those born in Canada or who have been in Canada for over ten years.
- And as of July, the employment rate tied to immigrants who touched down in the previous five years was 77.7%, compared with 86.6% tied to those born in Canada.
Bottom line: Upcoming inflation and spending data will paint a fuller picture of what’s happening in the economy, but jobs numbers tell us plenty of stories on their own.—SB