No wonder they call it the dismal science. Economists only see gloom in Canada’s latest jobs report, which saw 10,000 new jobs created in May.

Economists see the report as masking underlying weakness. Full-time jobs fell 41,100 in May, but this was more than offset by a rise in part-time employment. The manufacturing sector shed 12,200 workers, although the service sector added 28,400 jobs.

On a provincial basis, only Alberta and Newfoundland added full-time jobs. The rise in part-time work was primarily in British Columbia, which BMO Nesbitt Burns suggests could have been the result of the recent provincial election.

The jobless rate remained unchanged at 7% for the third straight month, and average hourly earnings rose 4%. “If the faster pace of wage gains persists, it would be another hint of rising inflationary pressures,” says BMO Nesbitt Burns, which also notes that a decline in the average number of hours worked in a week is also a poor sign

CIBC World Markets isn’t fooled by the strong headline numbers either, noting, “Canada’s recent labour market performance stands at odds with the U.S. — where layoffs continue to materialize — and on the surface would appear to validate the Bank of Canada’s less alarmist pace of monetary easing. However, a general deterioration in hours worked and further anticipated bloodletting in the manufacturing sector suggest that the road ahead for the labour market could still be a bumpy one.”

CIBC doesn’t see any inflation pressure in the wage numbers, noting that the stat is too volatile to cause much real worry. It is more worried about the hours people are putting in, or not putting in anymore· “While job gains in the first two months of the quarter appear supportive for Q2 output, the drop off in hours worked represents a serious roadblock to meaningful growth.”

TD Bank economists agree that the falloff in hours worked is worrying, noting, “Canada’s job market may not be going down the tubes, but there was very little heart-warming news in this morning’s Canadian employment report for May.”

RBC DS Capital Markets Research says, “The weak details in the report does not erase the fact that jobs rose for the third straight month, albeit at a slower rate. But the escalating losses in full-time positions does raise concern over the sustainability of consumer confidence and domestic demand.”

All shops note that the Bank of Canada will have one more jobs report before its next rate decision. RBC DS is calling for a 25 bps cut. CIBC expects another easing too, while BMO Nesbitt Burns suggests there could be two more in the cards. “Despite the rise in employment and firm wages, this report points to an underlying softness in the jobs market in Canada. While employment is holding up better than in the U.S., the decline in full-time and manufacturing jobs are signs that conditions are cooling. We look for the Bank of Canada to trim rates by 25 bps on each of the next two rate setting dates, July 17 and August 28.”