While July’s Labour Force date showing Canada’s unemployment rate remaining at a multi-decade low of 4.9% for a second consecutive month is good news for employees and job seekers, for businesses that are already navigating the pressures of inflation and increasing demand, rising compensation and competition for labour in a heated job market will continue to be a challenge, says Marwa Abdou, senior research director with the Canadian Chamber of Commerce.
The 4.9% unemployment rate is a record low since the monthly data began in 1976. Wage growth in July also continued at the previous month’s torrid pace, with average hourly wages up 5.2% year-over-year.
“While this is still below inflation, it increases the chance of a wage-price spiral that would further lift inflation above the Bank of Canada’s target,” Abdou said.
Labour force participation declines
Hours worked (on a monthly basis) declined by 0.5%. This is the third decline to hit 1.5% below the Q1 2022 peak in March. In addition, labour force participation decreased 0.2 percentage points to 64.7% following a 0.4 percentage point drop in June. The core-age labour force participation rate was 87.9% in July, well below the record high of 88.6% in March 2022.
“Persistent shortage of workers and lags in productivity will demand businesses rethink and retool existing jobs to maintain their bottom line and meet consumer demand,” Abdou said. “…The labour market remains exceptionally tight with low unemployment-to-job-vacancy ratio – building up steadily prior to the pandemic.”