Yahoo Finance Labour market adds 60K jobs as Bank of Canada eyes another hike
Average wage growth decelerated to 4.2% in June, from 5.1% in May
The labour market snapped back in June as employers added 60,000 jobs, Statistics Canada reported on Friday, likely solidifying at least one more Bank of Canada interest rate hike.
The jobs gain was three times more than the consensus from economists surveyed by Bloomberg and comes on the heels of job losses in May.
"The surge in employment in June suggests that another rate hike at the Bank of Canada's meeting next week is nailed on," Olivia Cross, assistant economist at Capital Economics, said in a note on Friday.
After the data, markets are moving to more fully price in a rate hike next week and another one later in the year.Royce Mendes, Desjardins
The wholesale and retail trade, manufacturing and healthcare industries saw the biggest increases. Full-time work drove the headline number while part-time employment fell.
The unemployment rate ticked higher to 5.4 per cent in the month, from 5.2 per cent, as the population grew and more people looked for work, the agency says.
"The rapidly growing labour force, which was also helped along by a rise in participation, will further ease some of the labour shortages reported by employers," Royce Mendes, managing director and head of macro strategy at Desjardins, said in a note to clients.
"That said, a growing population will also spur additional demand for goods and services in an economy that's already running too hot."
Average wage growth slowed significantly to 4.2 per cent, from 5.1 per cent in May.
Cross suggests there might be a "compositional effect" impacting the wage growth number because there were large job gains in the typically lower-paying wholesale and retail trade sector.
"Nevertheless, the rise in the unemployment rate and easing of wage growth will give the Bank of Canada some comfort that, despite continued strong labour demand, CPI inflation should continue to slow towards the 2% target," she said.
Jobs strength 'hardly' what BoC was expecting
This jobs report is the last major datapoint for the Bank of Canada to consider before it meets next week to announce its interest rate decision.
It's widely expected the central bank will hike another 25 basis points, bringing its benchmark rate to five per cent. However, Mendes says a fourth hike might also be on the table now.
"This pace of hiring is hardly what the Bank of Canada was expecting earlier in the year when it paused its rate-hiking cycle in anticipation of a rebalancing in the labour market," he said.
"After the data, markets are moving to more fully price in a rate hike next week and another one later in the year."
Despite the strong headline gain, Andrew Grantham, senior economist at CIBC Capital Markets, points to the rising unemployment rate and slowing wage growth as evidence of easing job market conditions, although it might not be enough to keep the Bank of Canada on hold next week.
Meanwhile, Cross says she believes the central bank will halt its rate hikes when its benchmark rate hits five per cent.
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.
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