Canada’s economy continued to add jobs last month, but it wasn’t good news. Statistics Canada (Stat Can) data show the country added a huge number of new jobs in June 2023. However, the massive gains weren’t enough to prevent the unemployment rate from rising. That’s right—Canada’s record population growth is outpacing its ability to create employment, and the result is likely to produce a new deflationary pressure.
Canada’s Economy Added 60,000 Jobs Last Month
The good news? Canada’s economy continued to print huge jobs gains last month. Employment rose 0.3% (+60,000 jobs) to 20.17 million in June. Even better news—it was driven by full-time job creation, which climbed 0.7% (+110,000 jobs). The size of growth is impressive, and likely to reinforce the need for higher interest rates.
Canada’s Unemployment Rate Is Climbing Despite Job Gains
The bad news? The unemployment rate is paradoxically climbing at the same time. Unemployment climbed 0.2 points to 5.4% in June, the highest level since February 2022. That’s still a very solid rate, and might even be considered an overheated labor market. The rate remains below the country’s rate entering 2020.
Canada’s Population Growth Is Outpacing Its Ability To Create Jobs
Canada entered a unicorn-type phase, that’s rarely seen—its population is outpacing its ability to create jobs. Another record year of population growth helped increase the labor force by 0.5% (114,000 people). It helped drive a 4.9% (+54,100 people) increase to the number of unemployed Canadians to 1.15 million in June. The rate might remain low, but the number of unemployed people hit a similar level to December 2019.
Canada might view this as a “desired” and intended outcome, with the impact already appearing. An overheated labor market contributes to excess demand, which helps to drive inflation. As employment markets loosen, competition increases helping to drive down wages, and the consumption that comes with it.
To that point, wage growth is now decelerating. Stat Can data shows June reported a sharp deceleration for wage growth, coming in at the lowest rate since May 2022—just over a year ago. That’s almost certain to continue to lower demand (people without jobs can’t apply for credit), and allow inventories to climb.
Another interesting point to consider is how this impacts Canada’s growth trajectory. Typically an increase in the unemployment rate is the result of jobs diminishing, as the business cycle tightens. In this case, we’re seeing Canada’s population growth begin to exceed its ability to create new jobs in a timely fashion.
If the trend of growth outpacing employment continues in the short-term, can immigration continue to hit its target goals? If it does, does it create deflationary pressure? If deflationary pressures are created, how does that impact home prices and rents going forward? Canada is about to boldly go where no country has gone before.
Well… no other country has gone post-Colonialism.
Is there any surprise here?
Immigration in theory is a boon if implemented correctly.
However, the government is using immigration to fulfil all the service jobs / part-time jobs that don’t pay a living wage. These new immigrants soon learn that the Canadian dream is a lie when they can’t afford the cost of living and are forced to live with 10 other roommates in buildings that barely (and often) don’t past code. 30% of new immigrants return home after 2 years.
Meanwhile, the government is releasing manipulated numbers and claiming that employment numbers are great, when reality they are just pushing the problem down the line.