OTTAWA – Canada's unemployment rate fell in July to its lowest level in nearly nine years as the economy added jobs for an eighth straight month, although at a slower pace compared to recent months.
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The Canadian economy added a net 10,900 jobs in July, Statistics Canada said Friday. This was largely in line with market expectations, according to economists at Royal Bank of Canada. This marks a slowdown from the previous two months, when the economy churned out 100,000 new jobs. For the May-to-July period, Canada added an average 36,900 jobs a month.
On a year-over-year basis, Canadian employment increased 387,600, or 2.1%. Over 90% of the new jobs created over the past 12 months were full-time positions, which tend to offer higher pay and steady benefits.
Meanwhile, the unemployment rate dropped to 6.3% in July, or the lowest level since October, 2008, or just before the onset of the financial crisis. When using U.S. Labor Department methodology, Canada's jobless rate in July was 5.3%.
Friday's positive jobs report was marred, though, by Canadian trade figures for June. The trade report indicated the trade deficit ballooned to 3.60 billion Canadian dollars ($2.86 billion), or the fourth-largest on record, due to a steep 4.3% drop in exports. This marks a rare, but significant, setback for the Canadian economy in some time, as growth has accelerated in the past year to a point where the Bank of Canada believed it was appropriate to raise its benchmark interest rate for the first time in seven years. Canada's gross domestic product rose at a 3.7% annualized rate in the first quarter, making Canada the best-performing economy among Group of Seven countries in early 2017, and economists expect second-quarter growth to hit or exceed 3%.
Josh Nye, economist at Royal Bank of Canada, said the surprise drop in Canada's unemployment rate to a postcrisis low "supports the Bank of Canada's expectation that slack in the economy will be absorbed later this year. That should keep the central bank in tightening mode."
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He said he expects the central bank to raise its benchmark rate again in October, but developments on inflation cloud the outlook.
Meanwhile, the U.S. nonfarm payrolls report for July, released at the same time as Canadian data, indicated hiring continued on a solid pace. The U.S. Labor Department said Friday nonfarm payrolls rose by a seasonally adjusted 209,000, and the unemployment rate ticked down to 4.3%, matching a 16-year low.
All of the 35,100 net new Canadian jobs created in July were full time, while part-time employment fell 24,300. However, the report also indicates all of the new jobs were among the ranks of the self-employed, who tend to be independent contractors that aren't necessarily paid on a regular schedule. Private-sector firms shed 3,200 workers, while Canada's public sector added 800 people to their payrolls.
Average hourly pay rose 1.3% from a year ago in July, data showed. The central bank has expressed concern about the tepid pace of wage gains.
On a sectoral basis, the goods-producing component of the economy added 1,900 positions, as a big gain in manufacturing was offset by declines in construction and agriculture. The services sector, which accounts for roughly two-thirds of Canadian economic output, added 9,000 positions, with wholesale and retail trade doing the heavy lifting.
Write to Paul Vieira at email@example.com
(END) Dow Jones Newswires
August 04, 2017 09:50 ET (13:50 GMT)