Canada’s economy unexpectedly lost jobs for the second month in a row in May, but wages posted their fastest year-over-year increase in nine years, Statistics Canada said Friday.
The economy lost 7,500 jobs in May as a drop in full-time employment was only partially offset by an increase in part-time jobs, while the unemployment rate held steady at 5.8 per cent for the fourth consecutive month.
Economists had expected an increase of 17,500 jobs, according to Thomson Reuters Eikon.
However, average hourly wages, a key indicator watched by the Bank of Canada, increased 3.9 per cent compared with a year ago, the monthly reading’s largest annual increase since April 2009.
Bank of Montreal senior economist Robert Kavcic said the wage growth suggests a strong labour market in Canada and an economy running near potential.
“It reinforces the idea that the labour market is really pushing full employment and tightening up enough to drive wage growth,” he said.
Kavcic said that combined with other recent economic data including a strong trade report this week, the Bank of Montreal is maintaining its forecast for the Bank of Canada to raise its key interest rate in July.
“We think the bank is still good to go,” he said.
The Bank of Canada kept its key interest rate on hold in an announcement last week, but dropped a reference to remaining “cautious’.” Economists interpreted the change as a hawkish signal suggesting that the next interest rate hike may be sooner rather than later.
The central bank has raised its target for the overnight rate three times since last summer and it now stands at 1.25 per cent.
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