Labour Force Survey June 2024: Summer job market stumbles amid rising unemployment and wage growth

Job growth was disappointing for June. The acceleration in wage growth is concerning and reinforces the cautious stance the Bank will take at their next meeting. They’re in a serious dilemma with both the unemployment rate and wages rising. Today’s report doesn’t bode well for markets hoping a faster cutting cycle from the Bank, which unfortunately could put economic progress in the first half of this year at risk.
Andrew DiCapua, Senior Economist, Canadian Chamber of Commerce

KEY TAKEAWAYS

Following two months of decent growth, Canadian employment saw little change in June (-1.4K), significantly below the expected gain of 25k jobs. However, the rise in the unemployment rate to 6.4% met expectations. The labour market shows signs of slowing, with average job gains over the past six months dropping to 32K.
Total hours worked decreased by 0.4%, despite a 1.1% increase from a year earlier. Second-quarter hours worked rose at an annual rate of 2.2%, suggesting sustained economic momentum from earlier in the year.
The unemployment rate increased by 0.2 percentage points to 6.4%. Amid strong population growth, the labour market continues to weaken, with diminishing hiring demand posing challenges for job seekers, particularly younger workers entering the market.
Job growth in June was driven by part-time employment (+1.9K), while full-time employment saw a decline (-3.4K), underscoring ongoing trends where part-time roles outpace full-time positions.
Ontario and Alberta led job growth in June, while Quebec and British Columbia reported the largest declines in employment.
Job gains were concentrated in sectors such as accommodation and food services, agriculture, and education, which have struggled with labour disruptions post-pandemic. Conversely, declines were noted in transportation, culture and recreation, and retail and wholesale. Eight sectors saw declines while seven reported gains.
Youth employment faced significant challenges, with employment among young men (aged 15-24) decreasing by 13,000 jobs, resulting in an overall youth unemployment rate of 13.5%, the highest since 2014, excluding pandemic years.
Average hourly wage growth accelerated to 5.4% year-over-year in June, up from 5.1% in May. This increase, alongside a rising unemployment rate, indicates persistent wage pressures in sectors experiencing labour shortages.

Implications

The labour market’s weakening trend is expected to continue as population growth outpaces job creation. Unemployment is projected to approach 7% by year-end, potentially prompting a rate cut by the Bank of Canada in July, with markets indicating a 58% probability. The upcoming CPI report on July 16 will be crucial in guiding the Bank’s decision.
Recent job gains primarily benefit sectors grappling with labour shortages and disruptions, likely leading to further labour market challenges in the near term.