Canada’s jobs market turned on its head in July, shedding 41,000 positions after gaining 83,000 in June.

Analysts had called for an additional 10,000 jobs last month.

Here’s what economists think about the

jobs numbers

and what they could mean for the

Bank of Canada

and interest rates.

‘Unambiguously weak’: BMO

“Our overall score for this (jobs) report was just 22.5 (out of 100), the worst reading in three years,” Douglas Porter, chief economist at BMO Economics, said in a note.

Signs of weakness were scattered throughout the data.

For example, while 10 of 16 sectors shed jobs, most of the losses were full-time, private-sector positions. Total hours worked declined, which bodes ill for gross domestic product in July, Porter said.

Wage growth is also down two percentage points from the same time last year, at 3.3 per cent. In June, wage growth came in at 3.1 per cent.

Four provinces recorded job losses, “but unfortunately it was the largest four,” said Porter, with British Columbia and Alberta each shedding just over 16,000 positions. That lifted Alberta’s unemployment rate to 7.9 per cent, compared to the national average of 6.9 per cent.

“This is an unambiguously weak report… although it comes hard on the heels of an unambiguously strong report. Taken together, the overall picture is a soft economy, running with some excess capacity — not surprising in light of the trade uncertainty,” he said.

Porter thinks the job market

 

will continue to slow, in turn putting downward pressure on inflation, “eventually supporting the case for a return to modest rate cuts.”

‘Made a mockery’: Capital Economics

“The Labour Force Survey has once again made a mockery of the economist consensus,” Alexandra Brown, a North America economist at Capital Economics Ltd., said in a note, referring to the jobs flip-flop between June and July.

Brown thinks there were some worrying signs in the report, including that most of the lost jobs were full-time, private sector positions.

While the

unemployment rate

held steady at 6.9 per cent, that was due to a drop in the number of people working or looking for work. Meanwhile, the labour force shrank by 33,000 even though Canada’s population grew by 37,000.

Brown thinks

 

the jobs report opens the door for the Bank of Canada to start cutting interest rates again in September, “although a surprisingly strong CPI (consumer price index) print next week could prompt another pause,” Brown said.

‘Back down to earth’: CIBC

“The Canadian labour market came back down to earth with a bump in July,” Andrew Grantham, an economist at CIBC Capital Markets, said in a note.

Looking at the seesawing from June to July, Grantham estimated that Canada gained 17,000 and 5,000 jobs on a three-month and six-month basis, signalling that the economy is still adding jobs, just not fast enough to keep pace with population growth.

“Job quality also appeared weak,” Grantham said, given that most of the losses were full-time and that private-sector employment has made no headway over the past six months.

The employment-to-population ratio also fell in July to 60.7 from 60.9 — the lowest since 2021.

Grantham thinks that number will get the Bank of Canada’s attention, though he acknowledged that a lot more economic data is coming down the pipeline before the next

interest rate decision

on Sept. 17 — including two more

inflation reports

, a jobs report and quarterly GDP.

“However, today’s weaker than expected employment figure is nevertheless supportive for our call of a 25-basis-point interest rate reduction at that September meeting,” he said.

‘Fighting for fewer jobs’: National Bank of Canada

“Recent jobs data have clearly been noisy but the punchline is: Canada’s labour market is soft,” Taylor Schleich and Ethan Currie, economists at National Bank of Canada, said in a note.

The pair reckon that since Donald Trump assumed office, employment in Canada has grown by approximately 5,000 positions per month and year-to-date. “Job growth hasn’t been this slow since 2016 (excluding 2020),” they said.

Schleich and Currie also worry that the Labour Force Survey is potentially overestimating job growth due to the way it accounts for non-permanent residents.

There are other hurdles, including slowing job vacancies and businesses that appear reluctant to hire. “That leaves more unemployed Canadians fighting for fewer jobs,” they said.

  • Canada loses 41,000 jobs, but unemployment rate holds steady
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That is why the share of workers unemployed for 27 weeks or more rose in July to its highest level since 1988, outside the pandemic years of 2020 and 2021.

“While employment is one of the four indicators guiding monetary policy, it’s the next two CPI reports that should have the most impact on the September decision,” Schleich and Currie said. “We think today’s data warrant higher September rate-cut odds, but if the next CPI report comes out soft, we should see the meeting’s easing probability rise above 50 per cent.”

• Email: gmvsuhanic@postmedia.com