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  • KPB & Co Research

Between June 2019 and July 2019, Canada's unemployment rate increased from 5.5% to 5.7%, indicating that the number of people actively seeking jobs out-weighed the number of jobs available. While the unemployment rate is still at 40-year lows, the slight increase in the rate is bound to create market jitters, especially within the context of the current economic environment. The current environment is highly combustible as global economic growth decelerates and trade tensions remain elevated. Any negative news will likely serve to confirm people's suspicion that a global recession is due, and likely, after a decade long bull market run. A look beyond the headlines of the job numbers reveals several interesting facts that shed light on what has been happening in Job markets. First, wage growth in July was 4.5% which is the highest wage growth seen in more than a decade, as over that period wage growth barely kept pace with inflation. Second, the job losses in July is primarily driven by one segment of the market, and third relative to 12-months earlier more people got hired.

A Sector By Sector Breakdown

Overall, about 109,000 jobs were lost between June 2019 and July 2019. While there were some job gains during the month particularly in "construction" of 42,000, "information, culture, and recreation" of 64,000, and "accommodation and food services" of 31,000, about 265,000 jobs were lost in "educational services". There are many factors at play in the loss of jobs seen in the educational sector, but it appears that the majority of the decline stemmed from seasonal factors going into the summer. During the same period last year, about 217,000 jobs were lost all of which were recovered by September 2018. A small number of the lost positions seen in July 2019 is due to the rollout of Doug Ford's plan to phase out over 3,475 teaching positions over 4-years.

There was job growth of 349,000 in July -2019 compared to July 2018. The gain in jobs came from multiple sectors mostly in the service sector of the economy, a trend that can be seen in many periods since 2016. The biggest gain for July 2019 came from "health care and social assistance" of approximately 82,000, with the second-largest owing to "professional, scientific and technical services" of 78,000. There were also notable job gains in the "construction" sector (47,000), "Transportation and warehousing" (52,000), and "Wholesale and retail trade" (41,000) sectors.

Canada Employment Levels By Sector (000s)

As we approach the end of the year, we could see concerns of heightened trade tensions play out in the job numbers. Already, the Bank of Canada has seen evidence of slower business investment as businesses take a more cautious approach in the midst of more uncertainties regarding market access. Recent actions by the Trump administration - to levy a 10% tariff on more Chinese imports and designating the country a currency manipulator, and the Chinese response- devaluing their currency significantly - will serve to further increase uncertainty. In this context, there could be more job losses in the months to come.

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