Labour market slack growing

New labour market data suggests that conditions are weak, boosting the case for further interest rate relief this year, National Bank Financial Inc. (NBF) says.

Statistics Canada published new payrolls data Thursday that showed employment ticking up in July, although overall payrolls for the year are hardly changed.

In a research note, NBF focused on the job vacancy data, which it sees as a signal of future labour market conditions — and, on that count said Thursday’s data “are not inspiring.”

Vacancies declined by 4.2% in July, and are now down 12% from the end of 2024, it noted.

At the same time, the ratio of open jobs to total labour demand also fell in the month, taking the share of vacancies down to 2.6% in July, compared with 3.1% in mid-2024, and 5.6% back in 2022.

“Looked at another way, there were 3.3 unemployed Canadians fighting for each vacant position in July,” it said. Statistics Canada noted the unemployment-to-job vacancy ratio is the highest it’s been since the start of 2017 (excluding the pandemic).

That ratio has risen due to combination of a drop in vacancies (down by 14.4% over the past 12 months), coupled with an increase in unemployed workers (up by 9.5% over the same period), Statistics Canada said.

Against that backdrop, “we’re not expecting hiring to meaningfully pick up this year which will only add to labour market slack,” NBF said.

It’s expecting further rate cuts, following the Bank of Canada’s reduction last week. “However, the next cut isn’t fully priced until January which is too late in our view. We see higher odds of an October cut, and the likelihood of even more rate relief being needed is growing,” it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.