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Canada’s labour market stumbled in July, losing 41,000 jobs, wiping out nearly half of June’s surprising gains. The unemployment rate held at 6.9%, but mostly because fewer people were looking for work.
The decline was led by full-time losses (-51,000) and a steep drop in youth employment (-34,000), pushing the youth unemployment rate to 14.6%, the highest since 2010 outside of pandemic years.
Job losses hit several industries, including information, culture and recreation (-29,000), construction (-22,000) and health care (-17,000). The only major offset came from transportation and warehousing (+26,000).
Rate decision still hinges on inflation
Despite the weakness, economists say the data is unlikely to push the Bank of Canada off its current rate-hold course.
"There’s still over a month before the Bank of Canada’s next rate decision and we don’t think today’s job numbers will do much to change its thinking,” said Michael Davenport, senior economist at Oxford Economics. He pointed to ongoing trade policy uncertainty, mixed inflation and growth signals, and major fiscal stimulus as factors keeping the Bank cautious.
BMO’s Douglas Porter said the report adds "downward pressure on inflation” and supports the case for a rate cut later this fall, but stressed that the Bank will want to see inflation slow "notably” in its next two reports for a September move to be likely.
TD’s Leslie Preston agreed, noting, "We think a strong argument for further rate cuts remains in Canada, we’ll see if the BoC agrees.”
For borrowers, it means the upcoming inflation reports on Aug. 19 and Sept. 16 will be the numbers to watch. If inflation continues to cool, the case for a fall rate cut will grow stronger, potentially lowering costs for variable-rate borrowers and those facing renewals later this year.
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