Preview: Due June 5 - Canada May Employment - A modest gain but a subdued picture
We expect Canadian employment to increase by 10k in May, which after a fall of 17.7k in April would leave trend looking subdued, if not as weak as three declines in the last four months have implied. We expect unemployment to remain at 6.9% after increasing in April from 6.7% in March.
This would be consistent with an economy seeing modest GDP growth in Q2, insufficient to make a significant dent in the output gap. The hit from tariffs is fading while higher energy prices will have a mixed impact on Canadian GDP, but will probably act as a net restraint on job growth. January and February weakness was probably influenced by weather but can also be seen as corrective from overstated gains in September. October and November of 2025, each of which exceeded 50k.
We expect modest May job growth to be more than fully explained by gains of 5k in construction, the public sector and natural resources, the former two correcting from April weakness and the latter supported by higher energy prices. Elsewhere we expect a flat to negative picture. We do however expect the job growth to come fully in full time work, in a correction from three straight months in which full time work declined but part time work increased.
We expect the labor force to be unchanged in a pause after two straight modest increases, seeing unemployment fall to 6.89% from 6.93% before rounding, but again rounding to 6.9%. We see participation unchanged at 65.0%, sustaining April’s increase after two months at 64.9%. A subdued labor market argues for limited wage pressure, though we expect yr/yr growth in the hourly wage for permanent employees to slow only marginally to 4.7% from 4.8%, still not erasing March’s sharp bounce to 5.1% from 4.2% in February. March’s bounce was exaggerated by year ago weakness. May did not see any significant change in the year ago base, limiting the potential for a sharp slowing.
