Although the number of unemployed people is generally viewed as a lagging indicator, it is an important signal of the health of the overall economy because consumer spending is closely linked to labor market conditions; the unemployment rate is an indicator that measures the percentage of the total unemployed who are looking for work in a country, and unemployment is often used as a measure of the health of the economy and the indicator measures the number of unemployed people who have searched for work unsuccessfully, and unemployment is one of the most important determinants of economic strength as its rise leads to lower incomes
What happens in the markets when the unemployment rate is too high? Governments do not like it when the unemployment rate rises too high, or when it unexpectedly increases more than expected. When this happens, the central bank may cut interest rates to help stimulate economy. The government may also use fiscal policy to stimulate employment gains. This could include infrastructure projects to create jobs, or adding unemployment benefits to help families until the unemployment rate falls. When the unemployment rate is higher than expected, it can cause country’s currency to weaken, which can cause a downward trend.
What happens when the unemployment rate is too low? When the unemployment rate is reported to be lower than expected, it can cause a country’s currency to move higher. That’s because low unemployment often leads to higher inflation, which leads to higher interest rates. However, it’s worth noting that low unemployment can’t last for long, and economists believe that a low unemployment rate for an extended period of time can cause inflation to rise excessively. When unemployment remains low for an extended period of time, it becomes increasingly likely that central bank will raise interest rates.
Unemployment rate rises to 6.4% in June
Compared to this time last year, total employment rose 1.7 per cent, or 343,000 jobs, Statistics Canada reported. The Bank of Canada is looking to cool the labour market, particularly in wage growth, as it weighs the timing of possible further interest rate cuts.
Average hourly earnings accelerated to 5.4 per cent annually in June from 5.1 per cent in May, Statistics Canada said. Leslie Preston, a senior economist at TD Bank, said in a note to clients on Friday that wages are showing more growth this month due to favorable comparisons with June last year and are “expected to fade next month.” Andrew Grantham, a senior economist at CIBC, said in a note that he expects wage growth to slow later in the year.
He said that despite the strong inflation report in May, the weak jobs numbers “should give the Bank of Canada comfort that inflation will converge to its 2% target over time.” Grantham stuck by CIBC’s call for a second rate cut on July 24, though he cautioned that the next inflation report in June would be the deciding factor. According to Reuters, financial markets have increased their bets on a rate cut this month to 55 percent from about 50 percent before the jobs report.
She expected hiring to remain sluggish through the end of the year, but borrowing costs should continue to fall to support the recovery. “The June jobs report confirms the weakness in the labor market and calls for a 25 basis point rate cut this month, taking the benchmark rate to 4.5 per cent,” Nguyen said. “The benchmark rate needs to come down to stimulate the economy.” Preston said the labor market is already showing signs of “slowing down,.
Employment rose by about 90,000 jobs (+0.4 per cent) in April
The unemployment rate remained unchanged at 6.1%. The employment rate remained steady at 61.4%, after six consecutive months of declines. In April, employment rose among men of prime working age (25 to 54 years) (+41,000; +0.6%) and women (+27,000; +0.4%) as well as among young men aged 15 to 24 years (+39,000; +2.8%). Fewer women aged 55 and older were in work (-16,000; -0.8%), while employment among men aged 55 and older and young women (15 to 24 years) was little changed.
The rise in employment rates in April was driven by part-time employment (+50,000; +1.4%). Employment rose in April in professional, scientific and technical services (+26,000; +1.3%), accommodation and food services (+24,000; +2.2%), health care and social assistance (+17,000; +0.6%) and natural resources (+7,700; +2.3%)
while it fell in utilities (-5,000; -3.1%). Employment increased in Ontario (+25,000; +0.3%), British Columbia (+23,000; +0.8%), Quebec (+19,000; +0.4%) and New Brunswick (+7,800; +2.0%) in April. There was little change in the other provinces. Total hours worked increased by 0.8% in April and were up 1.2% compared to the previous 12 months.
Average hourly earnings among employees rose 4.7% (+$1.57 to $34.95) year-over-year in April, following a 5.1% increase in March (non-seasonally adjusted). More than one in four workers (28.4%) are required to report to work or contact the workplace at short notice at least several times a month. The increase in employment in April was driven by part-time employment (+50,000; +1.4%). On a year-over-year basis, part-time employment rose 2.9% (+104,000) in April, while full-time employment rose 1.7% (+273,000).
Canada’s labour market has slowed since a year ago
Canada’s unemployment rate remained stable at 5.5% in September despite the national economy adding 64,000 jobs to the labour market. These gains were offset by very strong population growth, according to data released today by Statistics Canada. Canada’s labour market has slowed for a year as interest rates have risen, but the unemployment rate remains below pre-COVID levels.
The unemployment rate for all of 2019 was 5.7 per cent. 2019 was Canada’s last full year before the pandemic upended economic trends. Strong post-pandemic population growth is supporting stronger monthly job gains as more people enter the labour market. Last month’s job gains were concentrated in part-time work, while total hours worked were flat and more people worked in education services, transportation and warehousing. Meanwhile, job losses were recorded in finance and insurance, real estate leasing, information and entertainment, and construction.
The impact of the unemployment rate on markets: Strong news that can move markets immediately after its release. If the actual value of the index is higher than expected when it is released, it is negative for the currency, while if the value of the index is lower than expected when it is released, it is positive for the currency.
What is the poverty rate in Canada? About 2.4 million Canadians, or 6.4% of the population, were living below the poverty line by 2020, according to the 2020 Canadian Income Survey published by Statistics Canada on March 23, 2022.
