Canadian employment rose by 87,800 in May, a much stronger than expected reading given the consensus expectation of a gain of 10,000, said Rosenberg Research after Friday's Labour Force Survey (LFS).
This was a sharp rebound from the decline of 17,700 in April. There were other strong elements to the report, including the fact that the unemployment rate fell to 6.6% from 6.9%. It had been expected to remain unchanged. As well, full-time employment rose by 154,000. That was the largest one-month increase in full-time employment since February 2022.
Turning down the optimism a few notches, average hourly wages of permanent employees slowed to 3.2% year over year, from 4.8% in April, versus the expectation of 4.6%. In the month, wages fell by 0.9% month-over-month after seasonal adjustment, the largest drop since June 2020 during the height of the pandemic.
Digging into the full-time employment gains, Rosenberg sees that most of the increase came in the youth category, which jumped by 98,700. This is notable given the many stories about the employment challenges facing Canadian youth. Rosenberg doesn't think those challenges are gone.
As well, given the saw-tooth pattern of data from this report, Rosenberg thinks that the June LFS might reverse much of this.
However, as youth tend to be lower-paid, the strong employment growth here would tip average hourly wages lower. This also suggests that the survey wasn't as "rock-solid" as the headlines suggest, according to Rosenberg.
The rest of the increase in full-time employment was among those 25 years of age and over. The 55,300 rise was a good result. However, the annual growth rate in this cohort was 0.8%, down slightly from April's 0.9% rate, and the sixth time in the past seven months that there has been a sub-1.0% reading.
This points toward sluggish job growth, more in keeping with "mediocre" economic growth, it added.
As a consequence, beyond the headlines, Rosenberg sees an economy that is barely scraping by, with wage growth.