With the job market weakening, economists see rate cuts in the cards for Canada.

The jobs report came in on the weak side this morning, with employment down by 13,000 in June compared with a consensus call for an increase of 5,000. Most of the weakness, however, was in part-time youth workers.

Among industries, manufacturing is the weak spot, while there’s growth in retail and construction. “Canadian employers appear to be coming to terms with today’s economic reality, second guessing the need for excess workers in the face of still-deteriorating domestic and external demand. After having defied market expectations during the three previous months, Canadian employment disappointed in June,” says CIBC World Markets.

RBC DS Capital Markets Research concludes that this is, “A weak report. The Canadian economy is looking quite soft in the second quarter, though it is still growing. Monthly GDP was flat through April and now employment is starting to flatten out as well. Most of the weakness remains centred in the manufacturing sector as the weakness in the U.S. spills over into Canada.”

CIBC concurs, noting, “It seemed only a matter of time before Canada’s employment performance began to fade.” It sees weakness in second quarter output, too. “We look for second quarter GDP growth to downshift to roughly 1%, with further employment declines and a gradual rise in the jobless rate expected to produce an even slower advance in Q3.”

Not everyone is as pessimistic as CIBC however. “This report is not quite as weak as the sharp headline decline would suggest, since it was centred in part-time workers,” says BMO Nesbitt Burns Inc. “Even so, the figures clearly show that the economy is still struggling, leaving the door open for the Bank of Canada to trim rates on July 17.”

The consensus on the Bank of Canada’ response is for a 25 basis point rate cut. CIBC says that the market is still not pricing in a rate move, but, “We feel the combination of stagnant monthly GDP and this latest evidence of labour market weakness will see the Bank of Canada cut rates by 25 bps on July 17.”

RBC DS agrees, noting, “We continue to expect one last quarter-point rate cut from the Bank of Canada on July 17. Considerable monetary easing is in the pipeline and will boost both Canada and the U.S. later this year.”

TD Bank economists are taking the most aggressive stance, calling for, “Today’s report leaves the door wide open for further easing by the Bank of Canada over the summer months, with 25-basis-point rate cuts in the cards at each of their next two policy announcement dates on July 17 and August 28.” Even so, it sees unemployment reaching 7.5% by year-end.