Canada August Employment - With Q3 looking weak, we now expect the BoC to ease in September
Canada’s August employment report with a 65.5k decline with unemployment up to 7.1% from 6.9% is much weaker than expected. While the detail is a little less weak than the headlines suggest, and the data has been volatile recently, we are revising our Bank of Canada call, and now expect a 25bps easing in September rather than a hold.
The data has been volatile, but a surge of 83.1k in June employment has now been fully reversed, with August’s decline following a fall of 40.8k in July. August’s detail showed most of the decline coming from a 59.7k fall in part time employment, with full time down by only 6k, though over the last three months full time employment has underperformed part time.
August’s fall was unusually led by self-employment, down by 42.6k, with the public sector down by 15.5k and the private sector falling by a modest 7.5k, though in July it was private sector employment with a 39k fall that led the drop. In August goods producing employment rose by 1.7k with manufacturing down by 19.2k but construction up by 17.1k. Service producing employment fell by 67.2k. There were three main negatives, transportation and warehousing at -22.7k, professional scientific and technical at -26.1k, and education at -18.4k.
Despite a 31.2k fall in the labor force unemployment rose to 7.1% from 6.9%, reaching its highest since August 2021. Wages however are resilient, hourly wages for permanent employees up 3.6% yr/yr, up from 3.5% in July and the highest since February.
A weak Q2 GDP of -1.6% annualized strengthened the case for a BoC easing in September but was not conclusive given solid domestic demand and the number being in line with the BoC’s own forecast. However, with two straight months of weak employment data suggesting the economy is not regaining momentum in Q3, we now expect the Bank of Canada to deliver a 25bps easing in September. August CPI is still to be seen, but will be following a mostly comforting July release.