Canada’s economy added more jobs than analysts expected in May, and the growth rate of wages accelerated to a four-month high, but the jobless rate also ticked up, according to new data released Friday.
An economist explained the mixed bag of findings and why many indicate that the economy is starting to slow.
“So unemployment continues to edge up,” Armine Yalnizyan, an economist at Atkinson Fellow on the Future of Workers, told CTV News Channel on Friday. “This is the Bank of Canada rate hikes at work.”
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New data from Statistics Canada shows the country’s unemployment rate ticked up to a 28-month high of 6.2 per cent from 6.1 per cent in April, whereas the jobless rate has risen 1.1 percentage points since April of last year.
The StatsCan data also shows where employment gains in May occurred: mostly through part-time work, which more than offset full-time positions lost.
The agency warned that the proportion of part-time workers who could not find a full-time job was 18.2 per cent in May, the highest since 2021.
But what do the latest numbers indicate about the strength of the Canadian economy? Yalnizyan says that “everybody has been surprised” about its resiliency. However, the latest data shows “for sure it is cooling.”
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That’s a result of the campaign of interest rate hikes undertaken by the Bank of Canada, which lowered its overnight rate by 25 basis points on Wednesday, the first drop in more than four years.
Yalnizyan warns that it takes between “18 and 24 months” for rate hikes to “kick in at their full power,” and said it’s clear that “the pain is starting to kick in” for many workers.
“We haven’t seen the end of this world of pain that can happen to employment.”
Where’s the money going?
What are Yalnizyan’s main takeaways from the Statistics Canada report? She says one of the most interesting aspects is the job growth in the fields of health and social assistance.
“The care economy continues to grow,” Yalnizyan told CTV News Channel anchor Renee Rodgers. “It has accounted for about half of all the job growth in the last year.”
However, growth in wages is not equal, according to Yalnizyan, who warns that it’s “it’s mostly going to, non-unionized workers.”
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StatCan data showed the average hourly wage is approaching the $35 mark, but it’s a select few that are boosting this average.
“The wage growth that is occurring [is going] mostly to management — mostly to men, mostly to management.”
How does that look in a practical sense? Yalnizyan explained what it means for the average person.
“Unemployment continues to edge up,” she said. “Yeah, more people are working, but wage growth is starting to cool.”
Should you expect more rate cuts?
What does this new data mean for the Bank of Canada? Amid widespread speculation that more interest rate cuts are on the horizon, Yalnizyan says it’s important to realize that “it won’t ease that much” and “nobody can tell you what the path ahead is.”
Although Yalnizyan said she expects the Bank of Canada is at the beginning of an “easing cycle,” she warns that those hoping for a return to the rock-bottom rates seen pre-pandemic will be disappointed.
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“The markets are pricing in about three more cuts,” She says. “That will mean that we’ll be lucky if we hit 4 per cent by the end of this year.”
That also means, according to Yalnizyan, that many workers across the country will still be under immense pressure to make ends meet and pay their bills.
“Though real wages generally have caught up to inflation, they certainly haven’t caught up for everybody.”
Visuals by CTVNews.ca National Digital Producer Charlie Buckley
