OTTAWA — The Canadian job market continued to tighten in May as the unemployment rate hit another record low and wages continued to push higher, maintaining the pressure on the Bank of Canada to keep raising interest rates.
Statistics Canada said Friday the economy added 40,000 jobs in May, driven by a gain in full-time jobs, while the unemployment rate fell to 5.1 per cent, the lowest rate since at least 1976 which is as far back as comparable data goes.
The unemployment rate was 5.2 per cent in April.
The gain in employment came as average hourly wages for all employees rose 3.9 per cent on a year-over-year basis in May, compared with an increase of 3.3 per cent in April.
BMO Capital Markets managing director Benjamin Reitzes said the labour market was still in very good shape in May.
“There’s really nothing in this report to dissuade the Bank of Canada from maintaining their aggressive tone and pushing ahead with the further aggressive rate hikes,” Reitzes said in an interview.
The Bank of Canada raised its key interest rate last week by half a percentage point to 1.5 per cent in an effort to help bring inflation, which is at a three-decade high, back under control. The annual pace of inflation rose to 6.8 per cent in April, the fastest year-over-year rise in 31 years.
In raising its key policy rate, Reitzes noted the central bank said it was willing to act more forcefully if needed, suggesting it could increase rates even faster including the possibility of a three-quarters of a percentage point hike.
“I don’t think there’s anything in this employment report that pushes them to be even more aggressive than that, but it certainly doesn’t dissuade them,” he said.
As the Bank of Canada has raised interest rates, driving up the cost of borrowing, the real estate market has shown signs of cooling from its torrid pace.
However, the broader economy has continued to march ahead and most importantly for the Bank of Canada, the pace of inflation has shown no signs of slowing.
The job gains in May came as the number of full-time jobs rose 135,000 in May, but part-time employment fell 96,000.
TD Bank senior economist James Orlando said as Canadians headed out to patios and hit the road for overdue vacations, employers continued to search for workers to meet heightened demand.
“This has job vacancy rates at record levels, making it clear that the Canadian economy is operating beyond full employment,” Orlando wrote in a report.
The services sector saw a gain of 81,000 jobs as accommodation and food services added 20,000 positions. The number of professional, scientific and technical services jobs grew by 21,000, while educational services gained 24,000 positions and retail trade added 34,000 jobs in the month.
Transportation and warehousing lost 25,000 jobs, while the number of finance, insurance, real estate, rental and leasing jobs fell by 19,000.
Meanwhile, the goods-producing sector lost 41,000 jobs in the month as 43,000 manufacturing jobs were lost.
Long-term unemployment, people who had been searching for work or had been on temporary layoff for 27 weeks or more, accounted for 19.7 per cent of total unemployment in May compared with 15.6 per cent in February 2020.
This report by The Canadian Press was first published June 10, 2022.
Craig Wong, The Canadian Press
