08:02 AM EDT, 09/09/2024 (MT Newswires) -- Employment grew by 22,199 in Canada in August on a seasonally adjusted basis in Friday's Labour Force Survey, recovering from the 2,800 contraction seen in July by almost the margin anticipated by forecasters as consensus was for 25, 000 gains, noted Rosenberg Research.

That's where the good news ends, said Rosenberg Research. Full-time employment cratered 44,000 and has shown virtually no net change over the past six months. Not just that, but on a seasonally adjusted basis, 21,000 increases or virtually all of the employment gain Canada recorded in August came from formerly full-time staff being pushed into part-time status last month. "Unimpressive and uninspiring."

The unemployment rate rose by +0.2 percentage point to 6.6%, or 0.1 percentage point higher than the consensus expectation, the highest reading since September 2021 and a full 1.8 percentage points above the July 2022 cycle low of 4.8%. This is a sure-fire recession indicator, stated Rosenberg.

Slack is building up fast in the Canadian economy, and there is

nothing in the labor market to suggest the Bank of Canada can take its foot off the gas by even an inch in terms of the easing cycle, stated Rosenberg.

Nothing shows the accumulation of slack better than the falling employment rate -- total

employment as a share of the labor force -- which dropped again in August, down by 0.1 percentage point to 60.8%. Despite positive cumulative employment growth and a participation rate that's trending down -- 65.1% in August, a touch stronger than in July but down -0.5

percentage point compared with a year ago -- the employment rate has plummeted 0.9 percentage point so far in 2024 and is 1.6 percentage points off the February 2023 high.

That's a significant rise in excess capacity in the labor market, driven by soaring labor force growth in the wake of the post-COVID-19 immigration boom, it pointed out.

Adding to the soft tone in the report was the fact that without the 27,000 rise in employment in the education industry, employment growth would have been negative again -- schools and higher

education institutions staffed up in August, and high immigration has forced schools to play catch-up and expand. The same goes for the health sector, which saw a 25,000 employment increase.

Outside of those two sectors, things were mostly flat or falling, with meaty declines in professional services (-16,000) and "other" services (-19,000). Until recently, these sectors were bastions of employment growth.

Taken alongside the 43,600 drop in full-time employment -- the net growth in employment was all about the 65,700 rise in part-time employment -- it's clear that the private sector has lost its mojo in Canada, added Rosenberg.

That rotation to part-time work meant that total hours fell for the second time in three months, or 0.1%. Not even the wage data could provide a morsel for the hawkish wing of the Monetary Policy Committee to chew on -- average hourly earnings of permanent employees fell back below 5% year over year, dipping a full 0.3 percentage point compared with July to 4.9%, despite the denominator effect working in the direction of higher wages.

Overall, this August LFS report was nothing more than a clear continuation of the trend of rapidly rising slack that's been underway throughout the year, according to Rosenberg. Disinflationary forces

are beginning to point to a real risk of inflation undershoot and the sooner the Bank of Canada can get rates back to neutral, the better.

Nothing is standing in BoC's way, concluded Rosenberg.