Canada's economy unexpectedly lost a net 1,400 jobs in June, while the unemployment rate rose more than expected to 6.4%, a 29-month high, according to data released on Friday.
Analysts polled by Reuters had forecast a net increase of 22,500 jobs and the unemployment rate rising to 6.3% from 6.2% in May.
The unemployment rate, which has been on an upward trend over the past year, has increased 1.3 percentage points since April 2023 and is now the highest since 6.5% unemployment in January 2022, based on Statistics Canada data. Excluding the coronavirus pandemic years, unemployment was last as high as 6.4% in October 2017.
However, average hourly wage growth for permanent workers increased to an annual rate of 5.6% from 5.2% in May. The rate of wage growth, closely watched by the Bank of Canada (BoC) for its impact on inflation, was the fastest since December's 5.7%.
Wage growth, which tends to lag behind adjustments in employment, can reflect a variety of factors, including job composition and base-year effects, Statscan said.
BoC governor Tiff Macklem said last month that the labor market had cooled appropriately in recent months, and that achieving the central bank's goal of cooling inflation would not have to involve a sharp rise in unemployment. There is even room for economic growth and job creation without jeopardizing the bank's target for 2% inflation, the governor said.
The Canadian dollar, which was mostly unchanged in early trade, strengthened 0.08% to 1.3624 against the U.S. dollar, or 73.40 U.S. cents.
Markets raised their expectations for a rate cut this month to 55% from around 50% before the jobs report.
The central bank cut its key policy rate for the first time in more than four years in June and said more cuts were likely if inflation continued to cool. The next bank rate announcement is on July 24, about a week after the next inflation data is released on July 16.
