It has taken more than a year, and 4½ percentage points of interest-rate hikes, but the unsinkable Canadian labour market is finally showing cracks in its hull.
May’s employment decline of 17,000 snapped eight consecutive months of increases – the longest job-creation winning streak since 2017. The rise in the unemployment rate, to 5.2 per cent from 5 per cent, was the first in six months. The Bank of Canada was willing to shine this sort of contextual light on other key data in deciding last week to nudge interest rates still higher. April’s tiny uptick in inflation, at first glance, looked like a temporary hiccup in a declining trend – until the bank considered it in the context of the first-quarter gross domestic product numbers, which showed surprisingly strong growth and consumer demand. In that light, it looked like less a hiccup than a storm cloud.
Importantly, the employment declines were also entirely in the services sector, which shed 40,000 jobs. Services accounted for 94 per cent of the job gains during the surge of the previous eight months; that side of the economy has become a major preoccupation of the Bank of Canada, as it worries about persistent labour shortages and wage pressures.