The Canadian labour market gave back half of June’s surprising gains in July, shedding 41,000 jobs versus the consensus forecast of a 10,000 increase. Despite this decline, the unemployment rate remained unchanged as the labour force participation rate fell. Longer-term trends, reflected in the 3- and 6- month employment changes of 17,000 and 5,000 respectively, signal the labour market is still adding jobs, but not quickly enough to keep up with population growth.
Job quality also showed signs of weakness, with the entire decline driven by a drop of 51,000 full-time positions, leading to a 0.2 per cent decrease in total hours worked. Private sector paid employment was particularly soft, declining by 39,000 and remaining essentially unchanged over the past 6 months.
Young people aged 15 to 24 faced continued challenges, experiencing a decline in seasonally-adjusted employment in July. The youth unemployment rate rose to 14.6 per cent, up from 14.2 percent in the previous two months, marking the highest level outside the pandemic years since 2010. Meanwhile, the prime-age (25-54) unemployment rate held steady at 5.8 per cent.
The stark contrast between June and July’s figures is puzzling. One possible explanation lies in how Statistics Canada estimates the number of non-permanent residents – a population currently in sharp decline – using a 12-month moving average. At the same time, private employment trends from the Survey of Employment, Payrolls and Hours (SEPH), which is based on business-reported data, have been notably weaker than those from the Labour Force Survey (LFS) since the third quarter of 2024. This discrepancy suggests that Statistics Canada may be facing challenges in accurately estimating population changes.
The LFS uses a rotating panel design, where households remain in the sample for six months. Each month, about one-sixth of the sample is replaced, creating overlap between months. The large rise in the participation rate in June likely caused an overestimation of employment gains, while the drop in July likely led to an overestimation of job losses. This pattern suggests that the sampling rotation may be the main reason for the contrasting labour market results over the past two months.
This difference is most evident in Alberta, which recorded the largest employment decline in Canada last month after leading the nation in job growth in June. Alberta’s net loss in July was 17,000 jobs, with the construction industry hardest hit, shedding 20,300 positions. Interestingly, there are no clear signs that construction activity is slowing down in the province, yet this accounted for most of the job losses in the construction industry in the national survey.
Taken together, the June and July Labour Force Survey results suggest a softening economy with some excess capacity. The Bank of Canada will still need to see a meaningful slowdown in inflation over the next two CPI reports for a September rate cut to become likely.
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CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
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