MNI: Canada May Job Gains Smash Expectations Led By Full-Time

Canada's job market surged back to life in May on a rebound in full-time hiring that was the largest on record outside the pandemic, adding to evidence of a rebound in the second quarter after output stalled at the start of the year, and the last big report the Bank of Canada sees before its rate decision Wednesday.

Total employment rose by 87,800 in May versus an MNI Ottawa consensus for 12,500 net new positions, and more than undoing the prior decline of 17,700. Statistics Canada also said Friday that full-time jobs rose 154,000, mostly undoing declines earlier this year, while part-time positions fell by 66,200 in May.  

Employment is now little changed year-to-date and erasing what had been the worst start since 2009 around a recession linked to the Global Financial Crisis. Gains were also broad-based across industries including construction, culture and recreation, transportation and warehousing and hospitality.

Unemployment also unexpectedly declined to 6.6% from 6.9% versus a consensus for no change. It remains above the pre-pandemic average of 6%, in line with the Bank's view there is slack in the economy. 

The report underlines conflicting signals the Bank is offering, with officials saying if energy prices decline policy is about right at 2.25% but hikes could be needed if oil prices turn into wider inflation. Governor Tiff Macklem also said a reduction may be needed on top of his four cuts last year if there are major new U.S. tariffs. Investors have been betting on higher rates this year while economists see no move. 

The rate path is muddled because the soft job market is a mix of short and long-term shocks requiring risk management, Deputy Nicolas Vincent said in a recent speech. Vincent also said Canada has been in a low-hire, low-fire job market, a trend also being seen in the U.S.

The job rebound lines up better with the April flash GDP measure showing a 0.4% gain following Q1 GDP that was unchanged on a QOQ basis but down 0.1% at an annualized rate. Still, the flat read was well below the Bank's 1.5% annualized estimate for Q1.

Earlier on Friday Canada's business cycle arbiter said conditions to date are not a recession. 

Bank Senior Deputy Governor Carolyn Rogers cautioned lawmakers Monday not to read too much into the stall in first-quarter GDP because a flash figure for April also showed a potential rebound. Prime Minister Mark Carney said Tuesday Canada's Q1 slowdown was driven by moves to curb immigration and program spending.