The Canadian economy shed nearly 40,000 jobs last month, a sharp turnabout from economist expectations that 10,000 would be added, and a strong hint that the impending recession is starting to be felt.
August’s employment numbers mark the third consecutive monthly job decline, down 0.2%. That was enough to pull the unemployment rate up by a 0.5 percentage point, to 5.4% -- the first time the measure has risen in seven months, reports Statistics Canada, and marking a -0.6% decline from May, mostly affecting full-time positions.
“This was the first increase not coinciding with a tightening of public health restrictions since May 2020, when the unemployment rate reached its pandemic peak,” reads the report.
While the private-sector and self-employed workforce held steady, the public sector lost 28,000 positions, down -0.6%, also down two months in a row.
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Among the sectors feeling the most pain was the educational workforce, which lost 49,500 employees, also marking a three-month decline of -3.3%. There was also an exodus among construction jobs, with 28,000 fewer workers, down 1.8% annually.
The latest data is starting to reflect the pain of a higher interest rate environment, says Doug Porter, BMO’s Chief Economist, with more hikes to come given jobs remain strong from a historical perspective.
In a note, he writes, “While we can readily find some 'yes, buts' in this release, there is no debating that conditions are cooling quickly, with the pullback in construction a clear indication that rate hikes are beginning to bite. That cooling fits neatly with the view that the Bank of Canada will further moderate the pace of hikes and may indeed be getting close to the peak (we see another 50 bps of total rate hikes from here).
“However, the steady upward grind in wage growth and the stability in overall hours worked suggest that the Bank won't back down anytime soon. After all, even with the jump in the unemployment rate, it's still at a level (5.4%) that had been seen only once in the 45 years before the pandemic.”
According to StatCan, the declines in the education and construction sectors more than outpaced gains in other areas; positions in “other services” -- including civic and religious orgs, repair, and maintenance services -- rose by 15,000 (+2.2%).
The number of people working in professional, scientific and technical services also saw an uptick of 14,000 (+0.8%), resuming growth after two stagnant months. “Employment in this industry has been steadily trending upward since first recovering to its pre-pandemic level in August 2020,” writes StatCan.
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Employment also increased in agriculture (+9,000; +3.6%) and utilities (+6,000; +4.2%) in August 2022, while positions in accommodation and food services sectors were little changed for the third consecutive month. However, StatCan notes, this industry remains -14.6% below its pre-pandemic February 2020 level, lower than any other employment sector.
The age groups most affected were youth aged 15 to 24, which saw jobs fall by 25,000 (-0.9%), and primarily among young women (-16,000, down -1.3%), while employment levels among young men was little changed. While employment also fell among those aged 55 - 64 by 34,000 (-0.1%), employment among the core working age group of 25 to 54 was little changed, for the fourth month in a row.
However, despite these declines, overall wage growth is still on the rise, reaching 5.4% in August, an increase of $1.60, to an average hourly wage of $31.33. That’s up 5.2% from the previous two months, though still training the rate of inflation, which rose 7.6% in July.
StatCan also notes that hybrid work continues to be a prominent trend “though the specific nature of the arrangement continues to shift.” As of August, 16.8% of Canadians reported working exclusively from home, down 18% from July and 7.5% since the beginning of 2022. However, the number of those working both from home and the workplace rose 0.7% to 8.6% in August.
