Canada’s labour force shrank in June, largely due to people age 55 and older leaving the labour force.

Employment in the services-producing sector declined by 76,000 in June, with losses spread across several industries, including retail trade. (File photo: Clem Onojeghuo/Unsplash)

June’s Labour Force Survey from Statistics Canada shows Canada’s labour market is still tightening, making it difficult for Canadian employers to find workers.

Employment fell by 43,000 last month. It marks the first employment decline not associated with public health restrictions since the beginning of the pandemic. The reason employment fell is mainly due to a large amount of people age 55 and older leaving the workforce.

The unemployment rate fell to a new record-low of 4.9%, as fewer people searched for work. The reason for the decrease in unemployment was that fewer people were looking for work. The adjusted employment rate, which includes people who were not in the labour force but looking for work decreased to 6.8%, another record low.

Liam Daly, an economist with the Conference Board of Canada, says amid the tight labour market conditions, employment has risen among diverse groups such as recently landed immigrants and core-aged Indigenous workers living off reserve. Also, the employment rate among core-aged female workers was at 81.3%, just shy of the record high recorded in May.

“These improvements suggest that labour shortages are increasing labour market inclusivity by drawing in workers who traditionally face underemployment or lower rates of employment and labour force participation,” Daly wrote.

Employment in the services-producing sector declined by 76,000 in June, with losses spread across several industries, including retail trade. However, employment rose by 33,000 in the goods-producing sector, with gains in construction and manufacturing. Construction saw its first increase since March. Scotiabank economist Nikita Perevalov says the increase is a sign that construction is ramping up again, but the decline in retail trade is cause for concern.

“What is concerning is the decline in employment in the retail and wholesale trade sector (-61K net jobs), which could be evidence of falling spending due to consumer fatigue with high price inflation translating into fewer jobs in the sector,” wrote Perevalov.

The tight labour market has pushed up wages in Canada. In June, average hourly wages rose 5.2% to $31.24 on a year-over-year basis.

“A very tight job market is prompting stronger wage growth, which will go some way towards offsetting the erosion in real incomes by inflation,” wrote Rishi Sondhi, economist with TD Bank.

One way to help support labour shortages is to welcome high levels of immigrants with skills that meet the demands for talent. In 2022, Canada is set to open its doors to a record 431,645 new permanent residents. Canada is currently on track to meet this target. In the first half of 2022 alone, Canada has already landed about 200,000 new permanent residents.