Ottawa-Gatineau's unemployment rate falls below 4% in June

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The National Capital Region’s unemployment rate plunged to its lowest level in decades last month even as the local economy’s job-creation engine stalled.

In its latest labour force survey released Friday, Statistics Canada said Ottawa-Gatineau’s jobless rate stood at 3.6 per cent in June. That’s down from 4.3 per cent the previous month and marked the first time the rate has dipped below four per cent in at least two decades.

The historic low was largely due to a drop in the number of people actively looking for work. 

The region’s labour force shrank to 835,600 workers in June, down from 841,800 the previous month. That allowed the jobless rate to tumble even though the total number of employed residents in Ottawa-Gatineau held steady at 805,200 compared with May.

The decline in job-seekers was also reflected in the participation rate, which compares the size of the region’s labour force to the region’s population of working-age residents. The rate fell for the first time in months in June, dropping to 67.7 per cent from 68.3 per cent in May.

The report comes just days after a recent study from the Canadian Centre for Policy Alternatives warned rapidly increasing interest rates will likely send the Canadian economy into a recession and could cause significant “collateral damage,” including 850,000 job losses.

The Bank of Canada is expected to raise its key interest rate on Wednesday, with most economists predicting a hike of three-quarters of a percentage point.

A sector-by-sector look at the three-month rolling employment average shows that two of Ottawa-Gatineau’s key economic drivers – government and tech – posted significant gains in June.

The public administration sector gained a net 6,000 positions last month, while the tech sector added 4,400 jobs. Other gainers included professional, scientific and technical services (up at net 3,600 jobs) and accommodation and food services (up 2,800).

But those gains were offset by losses in industries such as health care, which shed a net 4,300 positions, and construction, which shrank by 3,100 jobs.

Nationally, the economy recorded a loss in jobs for the first time since January while the unemployment rate dropped to another record low.

Statistics Canada said the country lost 43,000 jobs in June as the unemployment rate fell to 4.9 per cent.

The May unemployment rate was 5.1 per cent, the lowest since at least 1976, which is as far back as comparable data goes.

Economic 'slowdown' coming?

“The job market still looks very strong after looking through some of the monthly noise,” said Bank of Montreal senior economist Robert Kavcic in an email.

Looking ahead, Kavcic said BMO is expecting a “meaningful slowdown in the economy later this year.”

Meanwhile, CIBC chief economist Avery Shenfeld said the Bank of Canada wouldn't be dissuaded from raising interest rates more aggressively for now, noting an increase of 1.3 per cent in hours worked and the decline in jobs being offset by lower labour force participation.

“On its own, the headline jobs decline isn't yet convincing evidence of a slowdown that will deter the Bank of Canada from a 75 basis point hike next week,” Shenfeld said in an email.

June's decline in the unemployment rate is attributed to fewer people looking for work, Statistics Canada said, while the loss in jobs was driven by a decline in self-employment by 59,000 jobs.

For business owners, a decline in the labour force participation rate only adds to their labour shortage woes.

Mark Kitching, owner of Waldo's on King bistro and wine bar in London, Ont., says hiring challenges are ongoing. He says he could hire two or three additional kitchen staff but isn't getting applicants.

“I talked to people in my industry, and we're all having the same problem,” said Kitching.

The vacancies at Waldo's mean staff have to work overtime hours, which Kitching says makes it more expensive and stressful to operate.

June also saw a faster pace of wage growth, with average hourly wages rising 5.2 per cent year over year to $31.24.

Wage growth accelerates

Kavcic said previous wage growth numbers were lagging and didn't capture “reality on the ground.”

“These numbers are now better reflecting conditions in the real economy,” he said.

In comparison to wage growth prior to the pandemic, June recorded the fastest growth since the collection of comparable data in 1998. However, the rise in wages in June was still below the most recent inflation rate of 7.7 per cent reported in May.

Wage growth was led by gains among non-unionized workers, who saw their wages go up by 6.1 per cent, while unionized workers experienced a slower rise in wages of 3.7 per cent.

Employment in the public and private sectors held steady.

Jobs in the services-producing sector declined by 76,000, erasing gains made earlier in the year. The largest decline in employment was in retail trade. The report said data over the next few months may help answer whether the decline was due to consumer behaviours changing as inflation remains high.

Employment in the good-producing sector rebounded, with 33,000 jobs added.

– With additional reporting from the Canadian Press