OTTAWA: Canada shed 17,000 jobs in May, pushing up for the first time in several months the unemployment rate to 5.2 percent, the national statistical agency said. The net job losses came as a surprise, after robust employment gains in recent months. Since last September about 400,000 new jobs had been created. “After a long string of outsized gains in job growth, hiring apparently hit a rough patch in May,” said Desjardins analyst Royce Mendes. According to Statistics Canada, most of the job losses were full-time and self-employed.
There were fewer people employed in the month in business, building and other support services (-31,000), as well in professional, scientific and technical services (-13,000), the agency said. Employment, however, increased in manufacturing (+13,000), “other services” (+11,000) and utilities (+4,200). Mendes commented that the total hours worked, which fell 0.4 percent in May, “looked ugly,” and that “the only decent reading for workers came in the wage numbers, which are still running at an above-five percent annual pace.”
RBC assistant chief economist Nathan Janzen noted that more economic data is scheduled to be released before the next interest rate announcement in July. The Bank of Canada, after becoming in March the first major central to pause its recent aggressive monetary policy to fight inflation, came off the sidelines this week to hike its key lending rate to 4.75 percent. This followed several back-to-back hikes started in June 2022 when interest rates were at a record low. “We continue to expect data releases to look softer as time goes on,” Janzen said in a research note, adding that “it will probably take more downside surprises to upend plans for another rate hike in July.”
Stock markets mixed Meanwhile, European stock markets dropped after gains in Asia Friday as investors awaited next week’s crucial interest-rate decision from the US Federal Reserve. The dollar was higher against main rivals, while the Turkish lira sat around record lows against the greenback. Newly re-elected President Recep Tayyip Erdogan appointed former Wall Street executive Hafize Gaye Erkan as central bank governor, signalling a possible shift in his unconventional policies to fight inflation.
Erkan, the first woman to head the Turkish central bank, is a former chief executive of US real estate finance firm Greystone, co-CEO of First Republic Bank and managing director at Goldman Sachs. Oil prices steadied Friday at the end of a volatile week for the commodity following Saudi Arabia’s decision to slash output. Expectations that the Federal Reserve will hold off raising interest rates on Wednesday for the first time since starting its hiking cycle last year to combat high inflation have pushed equities higher for most of the month. Market expectation was thrown off course, however, after the Bank of Canada’s surprise lift and a similar move in Australia this week.
The Australian and Canadian central banks “are raising rates in part because they think the Fed will hike once more and if they fail to match this they risk” a weakening of their currencies, said analyst Krishna Guha at Evercore ISI. Despite the rate rises elsewhere, analysts believe news of a forecast-busting jump in US jobless claims to the highest since October 2021 will cause the Fed to pause until next month. All three main US indices ended higher Thursday, with the S&P 500 entering a bull market after rising more than 20 percent from its October low.
Analysts said a pick-up in industrial stocks indicated a broadening of the rally while others said the United States could even avoid a recession, which many had feared would happen because of the surge in interest rates over the past year. Europe’s leading stock markets were trading lower Friday, a day after official data showed the euro-zone had fallen into recession. China stimulus talk Elsewhere, eyes are on China where there is growing speculation that authorities will unveil fresh stimulus measures to kickstart the world’s number two economy, with the post-zero-COVID rally already fading.
Disappointing readings on manufacturing activity and trade this week have compounded the view that officials need to step in, with reports suggesting the People’s Bank of China will cut interest rates soon. Expectations were ramped up Thursday after a key government adviser said borrowing costs should come down to help struggling firms’ financing ability. The need for action was reinforced Friday by Chinese data showing consumer inflation essentially flat in May and wholesale prices falling more than expected. “On the whole, the muted inflation environment may call into question the sustainability of the economic recovery, but it also provides a favorable backdrop for policymakers to roll out more policy support,” said HSBC’s Erin Xin.- AFP