• Jobs dropped 17k and markets took it dovishly for the BoC
  • Markets got it wrong—at least at first—as the details were far more robust
  • CDN jobs, m/m 000s // UR %, SA, May:
  • Actual: -17.3 / 5.2
  • Scotia: 25 / 5.0
  • Consensus: 21.3 / 5.1
  • Prior: 41.4 / 5.0

While a pop higher would have been nicer, markets got their initial reaction to this report all wrong in my opinion. The underlying details were much stronger than the headline’s reported decline of 17k jobs during May and a slight rise in the unemployment rate. The initial drop in shorter-term yields and weakening in the C$ has since been largely reversed. There are three primary reasons for this take. Chart 1 shows some highlights.

Chart 1: Canadian Jobs Break Down

First off, all of the jobs lost were concentrated among youths. With all due respect to youths aged 25–54, this is nevertheless a summer jobs report as opposed to a more disturbing sign of weakness. Youth employment fell by 77k including 52k fewer full-time jobs for youths and 26k fewer part-time jobs. Those aged 25+ saw 60k more jobs including 19k more f-t jobs and 41k more part-time jobs. Chart 2.

Chart 2: Youths Lost Out

Why does this matter? It would be nice if the summer and youth jobs markets were stronger, but recall the signs in advance that lessen some of the surprise factor (e.g. Indeed’s report on youth job postings) and indicated a softer summertime market than last year’s incredibly strong summer jobs market. The seasonality behind Canada’s two seasons—winter and bugs—took their toll on the headline.

Nevertheless, I suspect it’s not teenagers who are struggling as hard to meet mortgage payments, grocery bills and sundry other commitments. Perhaps some are. Youth pressures today—including housing affordability, recession risk and pandemic effects, to name a few—are real and carry a longer-term burden, but I’m much more encouraged by the fact that excluding youths saw a much hotter job market last month than the headline reading suggests. That’s good for consumption and housing markets along with a strong ongoing support for managing the shock of higher rates.

Further, all of the drop by type of employer was in self-employed positions. They fell by 40k whereas payrolls were up by 22k split between 12.5k more in the public sector and about 10k in the private sector. Self-employed jobs are a key part of the Canadian economy and labour force, often reflecting entrepreneurial zest and tomorrow’s future engines of growth. The quality of the self-disclosed data, however, is usually viewed as being weaker than harder payrolls data.

Third, wage growth accelerated again (chart 3). Wages of permanent employees were up by 4.5% m/m at a seasonally adjusted and annualized rate. That’s a sharp rebound from the prior month’s 0.8% figure and gets us back up to firmer readings we previously had. February was up 6.5% m/m SAAR, March was up 2.1%, April slowed to 0.8%, but May was back up to 4.5%. Guess what part of this report will catch the BoC’s attention!! Chart 4 breaks down wage growth by sector in m/m SAAR terms.

Chart 3: Average Hourly Wages of Permanent Workers; Chart 4: May Average Hourly Wage Growth By Sector

Chart 5 shows the breakdown of total employment changes in May by sector with the caveats they don’t control for the aforementioned distortions. Chart 6 shows ongoing growth in hours worked in Q2 despite the m/m dip in May that itself was likely distorted by the same effects. This is a decent support for Q2 GDP growth.

Chart 5: May Changes in Canadian Employment Levels by Sector; Chart 6: Canada Total Hours Worked