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The Quick Take: July 6, 2018

Labour Force Expansion Leads Unemployment Rate Up

Cory Renner
Industrial Economic Trends

“Today’s release provides a first indication that labour market slack may be easing. Recent employment growth has been weak, but low levels of labour force participation have kept the unemployment rate low. An expanding labour force and weaker wage growth should ease the Bank of Canada’s concern about wage-induced inflation.”

Employment rose by 32,000 jobs in June, as both full-time and part-time positions increased.

Employment gains were led by Ontario (+35,000), Saskatchewan (+8,300) and Manitoba (+4,100).

Interestingly, labour participation rates rose for the first time in months, leading the unemployment rate to rise from 5.8 in May to 6.0 per cent in June.

In fact, the labour force’s expansion of 76,000 was the largest in nearly six years.

A rising unemployment rate is not necessarily a bad thing—it could mean that firms have more available labour to hire, which could boost employment in the coming months and ease fears of inflation-induced wage gains.

Year-over-year average hourly wages declined from 3.9 per cent in May to 3.6 per cent in June, indicating a loosening of labour markets conditions.

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