Canada’s unemployment rate fell to a record low of 5.1% in May as Canadian employers
continued hiring in an increasingly tight labour market.
Statistics Canada reported that the economy added 39,800 jobs in May, surpassing the 27,500
gains anticipated by economists. The nation’s jobless rate fell to 5.1% from 5.2% in April,
bringing it to the lowest level since the data started being tracked back in 1976.
However, the overall gain in net new jobs was masked somewhat by a massive shift of part-time
jobs to full-time positions -- another sign of a tight labour market. Full-time employment rose by
135,400 with part-time jobs down 95,800 in May.
Also, wage prices across Canada continue to accelerate. The average hourly wage rate was up
3.9% in May from a year ago, and up from an annualized gain of 3.3% in April.
The latest data illustrates the extent to which Canada’s labour market is running up against
maximum employment and will struggle to grow further without continuing to fuel wage gains.
The imbalance between demand and the supply of jobs is a primary reason why the Bank of
Canada is tightening monetary policy so aggressively.
Canada’s central bank has increased its main policy rate to 1.5% from 0.25% earlier this year,
and is expected to lift borrowing costs as high as 3% by October of this year.
The Bank of Canada’s next interest rate decision will be released on July 13, with money market
traders pricing in a 50-50 chance for the central bank to accelerate its tightening and raise rates
by 0.75 percentage points.
The bulk of the new job gains came from the unemployment ranks, with the labor force growing
by just 11,800 during May.
While the employment gain in May was more than double the 15,300 increase in April, the
overall trend is slowing sharply as employers struggle to find new workers. Employment this
year has increased by about 264,000, versus an increase of 85,000 in the labour force.
Canada’s economy has added more than one million jobs over the past year, with employment
nearly half a million above February 2020 levels.
The wage gains in May were some of the strongest in records going back to the 1990s. Wage
gains for permanent workers rose 4.5% in May, up from 3.4% in April.
