Canada unexpectedly sheds jobs in June, unemployment rate rises to 6.4%

OTTAWA (Reuters) – Canada’s economy unexpectedly lost a net 1,400 jobs in June, while the unemployment rate increased more-than-expected to a 29-month high of 6.4%, data showed on Friday.

Analysts polled by Reuters had forecast a net gain of 22,500 jobs and the unemployment rate to rise to 6.3% from 6.2% in May.

The jobless rate, on an uptrend up over the past year, has risen 1.3 percentage points since April 2023 and is now the highest since 6.5% unemployment in January 2022, Statistics Canada data showed. Excluding the coronavirus pandemic years, unemployment was last as high as 6.4% was in October 2017.

The statistics agency noted finding jobs was getting harder, citing signs including rising unemployment among youth and, more recently, core-aged men. The unemployment rate for youth rose 0.9 percentage points to 13.5%, which, outside of the pandemic, was the highest since September 2014.

The average hourly wage growth of permanent employees, however, accelerated to an annual rate of 5.6% from 5.2% in May. The pay growth rate – closely tracked by the Bank of Canada (BoC) because of its effect on inflation – was the fastest since 5.7% in December.

The growth in wages, which tends to lag adjustments in employment, can reflect a range of factors, including composition of employment and base-year effects, Statscan noted.

BoC Governor Tiff Macklem said last month that the labor market had cooled reasonably in recent months, and achieving the central bank’s goal of cooling inflation did not need to involve a sharp rise in unemployment. There was even room for economic growth and jobs creation without imperiling the bank’s target of 2% inflation, the governor said.

In June, jobs were shed in full-time work, while part-time positions were added in the month.

Employment in goods sector increased by a net 12,600 jobs, mostly in agriculture, while services sector lost a net 14,100 jobs, led by Transportation and warehousing and Information, culture and recreation. Overall, there were 1.4 million unemployed people in June, up 3.1% from the previous month.

The weak jobs figures could increase the likelihood of a July interest rate cut after an unexpected uptick in inflation in May brought money market bets on a second trim in two months to below 50%.

The central bank lowered its key policy rate for the first time in more than four years in June and said more cuts were likely if inflation continued to cool. The bank’s next rate announcement is on July 24, roughly a week after the next inflation data is release on July 16.

(Reporting by Ismail Shakil in Ottawa; Editing by Dale Smith)