The labour market shows further signs of cooling, as employment growth slowed and job openings continued to drop, according to the latest data from Statistics Canada; yet, wage inflation remains a concern.
Payroll employment was essentially flat in July, rising by less than 5,000 workers, down sharply from an increase of 65,900 in the previous month, StatsCan reported.
The number of job vacancies declined by 5.8% in the month, dropping by 43,100 to 701,300. Over the past 12 months, the number of unfilled jobs is down by 28.1%, it noted.
StatsCan said the job vacancy rate was down by 0.3% in July, and the ratio of unemployed workers to open jobs continued to rise — reaching 1.7 in July, up from 1.5 in June.
“The successive increases in the unemployment-to-job vacancy ratio since January indicate that labour market conditions continued to ease in July, even though the ratio remained below pre-Covid-19 pandemic levels,” StatsCan said.
The drop in vacancies and the decline in the job vacancy ratio indicate that excess labour demand is “fading fast,” said BMO Capital Markets in a research note.
“Considering that these data are two months old, at this rate that excess demand might, in real time, already be mostly gone,” it noted.
Despite the signs of easing in the balance of labour supply and demand, StatsCan said wage growth pressure hasn’t abated.
It reported that average weekly earnings were up 0.8% in July, faster than the monthly growth rate in both May and June. And year-over-year growth in average weekly earnings accelerated to 4.3% in July, from 3.7% in June.
“Of course, wages are a slow-moving train that take time to change direction once they get going,” BMO said. “Think of the ongoing negotiations and work stoppages now as contracts come to renewal, following three years of inflation and job-market tightness that didn’t exist when those were initially inked.”
However, given the recent shifts in labour market conditions, “wage pressure should ease through 2024,” it said.
“There is more evidence that Canada’s job market is softening, albeit from extreme levels,” BMO said. “It’s still premature for this to feed into wages and, therefore, inflation, so the Bank of Canada will remain on high alert. But it does suggest that the Bank might be able to keep leaning on the economy and inflation with rates at current levels.”