The upcoming Canadian jobs report for July is anticipated to reveal a further weakening in the labor market. Job growth has slowed significantly in recent months, and it is projected that only 15,000 new jobs will be added in July. As the population continues to rise, the unemployment rate is expected to increase to 6.5% from 6.4% in June. This is a stark contrast to the pre-pandemic rate of 5.6% in early 2020 and the sub-5% rate experienced during the post-pandemic labor shortage in 2022.
Unfortunately, forward-looking indicators do not paint a positive picture for hiring demand in Canada. Job openings have been on the decline, and businesses surveyed in the Q2 Bank of Canada outlook survey have expressed limited intentions to hire and invest in the coming year. While employment growth has slowed, wage growth remains relatively high according to the labor force report. However, other sources, such as the SEPH survey, have indicated a more significant slowdown in wage growth. Business expectations regarding wage growth have also decreased significantly, aligning with the reduced hiring demand reported in the Bank of Canada Business Outlook Survey. It is expected that wage growth will continue to decrease, which may alleviate concerns about future inflation and support the ongoing interest rate cuts by the Bank of Canada.
Looking ahead, data on Canadian goods exports for June is expected to show a 0.4% decrease, while imports are projected to have dropped by 0.6%, leading to a narrower trade deficit of $1.7 billion. This decline is likely attributed to a decrease in motor vehicle shipments and lower oil prices impacting trade flows. In contrast, U.S. advance economic indicators demonstrated a narrowing of the goods deficit by US$2.5 billion in June, driven by higher export growth (2.5%) outpacing import growth (0.7%). The increase in exports was widespread, with food and beverages leading the way, while imports were supported by industrial supplies despite a decrease in auto imports.
It is important to note that the information provided in this report has been compiled by the Economics Department of RBC Financial Group and is based on reliable sources. While efforts have been made to ensure accuracy, no guarantee is provided. This report is intended for investors and business individuals and does not serve as a solicitation to buy or sell securities.