08:51 AM EDT, 06/06/2025 (MT Newswires) -- The Canadian labor market continues to weaken, although for now only gradually, said CIBC after Friday's Labour Force Survey (LFS) data.

While employment managed to register a modest and unexpected increase in May of 9,000 versus a 10,000 consensus decline, that was still below the pace of labor force growth and as a result, the unemployment rate ticked up to 7.0% as anticipated, noted the bank.

Employment fell as expected in trade-sensitive areas such as manufacturing and transportation & warehousing, stated CIBC. A decline in public administration jobs reflected the unwinding of temporary positions in the prior month linked to the Canadian federal parliamentary election.

However, job growth outside of those areas was slightly stronger than anticipated, mainly driven by a 43,000 gain in wholesaling & retailing. While the mix of jobs appeared positive (+58,000 full-time with part-time declining), that didn't result in any pick up in hours worked, which Statistics Canada stated were flat on the month and up only 0.9% year over year.

Average earnings for permanent workers were up 3.5% year over year, which was modestly above expectations but well below prior peaks and unchanged from the previous month.

While Friday's data wasn't quite as bad as expected, there are still signs of slack gradually building in the labor market, which supports CIBC's call for a return to interest rate cuts at that Bank of Canada July meeting, although admittedly with a lot more data and tariff news still to come before that decision.