Canada’s unemployment rate rose in May despite a gain of 27,000 jobs because the population was growing at a faster pace than employers were adding jobs, according to Statistics Canada. Anne Gaviola has this story and more in Business Matters for June 7, 2024.
A decelerating economy is pushing more Canadians into part-time work, disrupting young Canadians' attempts to gain early work experience, as per the recent job data.
Despite a rise of 27,000 jobs, Canada's unemployment rate increased to 6.2% in May, slightly up from the previous month's 6.1%. The population growth outpaced job creation, with gains in healthcare, finance, and food industries offset by losses in construction and transportation.
The rise in part-time employment, totaling 62,000 jobs, contrasted with a decrease of 36,000 full-time positions. Many Canadians, particularly youth, are resorting to part-time jobs out of necessity rather than choice. This trend marks a shift from the pandemic recovery, which initially saw growth in full-time employment.
The summer job season, crucial for young workers, experienced a decline in employment rates for returning students aged 20-24. This decline is attributed to a slow start to the summer job season, with established workers turning to seasonal work amid a cooling economy, leaving fewer opportunities for youth.
The influx of international workers and students competing for part-time jobs is exacerbating youth unemployment rates. However, incoming caps on international students imposed by the federal government may alleviate this competition, directing job opportunities to domestic workers.
While the economy has slowed, it has not witnessed significant job losses indicative of severe recessions. Lowering borrowing costs may stimulate hiring in the latter half of the year, but substantial acceleration is unlikely until further easing in central bank policy rates.
Despite robust wage growth, signs of weakness in the labor market may prompt the Bank of Canada to reassess future rate cuts. Strong job growth in the United States may influence the Bank of Canada's rate decisions, as both countries' economic policies are intertwined.
While wage growth is a factor in determining future rate adjustments, it is only one aspect. The Bank of Canada is closely monitoring inflationary pressures, which have yet to materialize despite wage increases. This allows the bank more flexibility in its interest rate decisions as it navigates the economic landscape.
