Canadian Labor Market Softened Last Month

July 11, 2008

Canada’s jobless rate rose to 6.2% in June from 6.1% in May and a low of 5.8% in January and February.  Jobs dropped by 5K instead of increasing moderately as forecast.  That was the largest decline in 22 months.  Full-time jobs posted on-year growth of 1.1% but fell by 3.0% at an annualized rate between April and June.  Over the last two month, full-time workers fell by 71.4K, while part-time employees increased 74.8K.  In June, job declines of 15.9K were recorded in construction and 5.4K in overall services despite a 37K increase in professional and technical services.  Hourly wages rose 4.4% y/y, the 11th straight increase of at least 4.0% and twice as much as the latest on-year climb in consumer prices. I expect concern about inflationary pressure to persuade Canadian monetary authorities not to cut their 3.0% overnight target rate next week. After reducing rates by 150 bps between December and April, officials surprised analysts by holding rates steady when they met in early June.



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