Wages rose by 5.1% last month, a moderate decline from the prior three months.

The employment rate—the percentage of people aged 15 and older—declined by 0.3 percentage points to 62.1% in May. This reflected strong population growth in the month (+83,000) and little change in employment.

Following five consecutive months of a low 5% unemployment rate, the jobless rate rose 0.2 percentage points to 5.2% last month. This was the first monthly increase since August 2022. According to the median estimate in a Bloomberg survey, the figures missed expectations for a gain of 21,300 positions and a jobless rate of 5.1%.

Following an unanticipated robust beginning of the year, Canada’s employment market demonstrated dynamism well into the second quarter. A confluence of factors, including a tight labour market, solid economic growth, persistent inflation, and a resurgence in housing market activities, propelled Governor Tiff Macklem and his team to increase the overnight lending rate to 4.75% on Wednesday. This hike came after a previously announced halt in January. Policymakers perceived the enduring excess demand in the economy as “more persistent than anticipated.”

It seems improbable that the Bank of Canada would disrupt the interest rate pause that commenced in January merely for the 25 basis point interest rate increase. A single employment report exhibiting softer figures doesn’t constitute a new trend, especially considering that historically, the labour markets remain extraordinarily tight. Before the following decision on interest rates is due on July 12, we anticipate another jobs report, the May Consumer Price Index (CPI) report, and the Bank’s intensely scrutinized Business Outlook Survey. While we project a continued trend of softer data releases over time, it would likely require further unexpected downturns to derail plans for another rate hike in July.