By Ismail Shakil and Steve Scherer
OTTAWA (Reuters) -Canada’s economy added far more jobs than expected in June, data showed on Friday, a result analysts said probably seals the deal for another Bank of Canada (BoC) interest rate hike next week.
Jobs increased by a net 59,900 in June, the most since January and higher than a forecast gain of 20,000, while the jobless rate rose to 5.4% from 5.2% as more people searched for work, Statistics Canada data showed on Friday.
The unemployment rate in June increased for the second consecutive month and is now at its highest level since February 2022, though still below a pre-pandemic 12-month average, Statscan said.
The June jobs report is the last major economic figure to be released before the BoC’s rate announcement on Wednesday.
The jobs figures “are good enough to give the green light for the bank to hike next week,” said Derek Holt, vice president of capital markets economics at Scotiabank. “We still have a jobs market that is holding on quite nicely.”
The central bank raised its overnight rate to a 22-year high of 4.75% last month on concerns about sticky inflation and said that further moves would be dependent on the latest economic figures.
Data in the past month have shown some signs of a slowdown – inflation cooling to 3.4%, a tepid May jobs report and a surprise trade deficit in May – but not enough to diminish market expectations of another rate hike.
Growth has remained resilient despite nine rate increases totaling 450 basis points since March of last year. The economy regained momentum in May, likely growing 0.4% on the month, after stalling in April.
“The return to solid job growth in June should … lock in a second consecutive 25-basis-point rate increase next week as central bankers scramble to tamp down the surprisingly resilient economy and resultant excess inflationary pressures,” said Royce Mendes, head of macro strategy at Desjardins Group.
A large majority of economists polled by Reuters also expect the bank to lift rates by another quarter-point and then hold well into 2024.
The Canadian dollar was trading 0.3% higher at 1.3328 to the greenback, or 75.03 U.S. cents.
The average hourly wage for permanent employees – a figure the Bank of Canada watches closely – rose 3.9% from June 2022, compared with a 5.1% year-over-year increase in May. It was the smallest increase in wages in 14 months.
The net jobs addition in June, the largest since January, were driven by full-time work. Employment gains were concentrated among men aged 15 to 24 as well as the core 25 to 54 age group, while employment among women of all age groups was little changed in June.
Employment in the goods sector increased by a net 9,800 jobs, mainly in the manufacturing sector, while a net 50,000 services jobs were added in June, led by wholesale and retail trade, as well as the healthcare and social assistance sectors.
(Reporting by Ismail Shakil and Steve Scherer in Ottawa; Additional reporting by Dale Smith in Ottawa, Editing by Emelia Sithole-Matarise and Mark Porter)
