Despite adding 27,000 jobs in May, the labour market continued to soften as the unemployment rate rose to 6.2%. Job growth came from part-time employment, which increased by 62,000, while full-time employment was down by 36,000. Most of the new jobs were in the service sector, including retail, accommodation, and food services. However, construction saw a decline of 30,000 jobs, which is concerning as we aim to spur on new housing development. The employment gains were concentrated in Ontario, with declines in both BC and Alberta, highlighting overall weakness in the numbers.
The unemployment rate will likely continue to rise in the coming months. Limits on temporary residents will moderate population growth and keep the unemployment rate from rising too high later in the year. We expect the unemployment rate to peak at 6.4%.
Wages were the only troubling part of the report. Average hourly earnings rose to 5.1% from 4.7% in April, which is back in line with the trend over the past year. While this might be a bit troubling for the Bank, they will likely take note of the growing slack in the job market. The continued rise in the unemployment rate and the increase in the involuntary part-time rate to 18.2% suggest that wage pressures will subside.
The story for the central bank is that while the economy is slowing, wages are still sticky. The focus for the Bank of Canada will be the two CPI inflation reports before the next policy meeting in July.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
For nearly twenty-five years, there has been a significant shortage of new purpose-built rental construction. Instead, condos have become the primary source of new rental properties. This shift in construction activity is primarily due to differences in developers’ financing methods and the varying equity requirements for these types of projects.
In our latest Housing Affordability Watch instalment, we explore the obstacles to accelerating rental housing development, potential solutions, and the urgency of addressing these issues.
Read it here: Making the Economics of Affordable Housing Pencil Out
Independent Opinion
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