06:56 AM EDT, 08/01/2025 (MT Newswires) -- Canada's Survey of Employment, Payrolls and Hours -- better known as SEPH -- which provides important, although lagged, perspective on the Canadian labor market, noted National Bank of Canada.

Investors received May's SEPH data on Thursday, while the Labour Force Survey (LFS) for June has been long published, pointed out the bank. Unlike the LFS, which is a survey of households, the SEPH is based on administrative data from businesses.

According to the the last SEPH data, there's been no job growth in 2025, although employment did inch up modestly in April and May. Zooming out further, labor market sluggishness has been a longer-running story in the SEPH, with employment up just 0.2% versus last year.

This looks much less upbeat than the LFS even after National Bank adjusts the series to make it comparable to SEPH concepts. LFS employment may be overstated given how the survey controls for population growth.

Taking a backward-looking moving average of nonpermanent resident growth is fine when demographic growth is low and stable, but when volatile, this methodology can miss the mark, which is what the bank is seeing now.

"Unfortunately," National Bank can't yet validate -- or invalidate -- the LFS's reported June hiring surge given reporting lags but Canada's establishment survey also contains data on job vacancies, which can give the bank an idea of labor demand.

Here, recent vacancy data calls into question the 83,000 jobs that were reportedly added last month. Continuing the recent trend, job vacancies fell in May and the national vacancy rate is now comfortably below pre-pandemic levels.

This is also consistent with the latest Bank of Canada Business Outlook Survey (BOS), which showed muted business hiring plans. Looked at another way, there are 3.3 unemployed workers for each open job, pointed out the bank. Back in 2022, there was exactly one unemployed Canadian for each vacancy.

Comparisons to the United States are also informative. While the U.S. labor market has softened in recent years, it's been modest compared with Canada, supporting a much less restrictive BoC policy stance vis-a-vis the Federal Reserve.

Finally, National Bank can use this report to test the BoC's claim that recent job market weakness is all about trade. While weakness is more acute in trade-sensitive sectors, it's hardly the only industry where hiring has been subdued.

The diffusion of job gains shows that only 42% of industries have enjoyed employment growth over the last six months. That's well below the near-60% diffusion that prevailed briefly in H2 2024, well below the broader historical average and has only been weaker during COVID-19 and the Global Financial Crisis.

Overall, the more data the bank gathers, the more it looks like June's "blowout" LFS is an outlier, overstating the strength of Canada's labor market, it added. Still, for methodological reasons, LFS job growth could remain inflated, which is why National Bank argues that the unemployment rate will be the most important measure to look at when next Friday's data is released.

With several indicators -- including but not limited to those contained in the SEPH -- suggesting the labor market is weakening, not improving, more slack may be visible soon.

For the BoC, inflation is arguably the most important indicator guiding future policy decisions, but the return of sluggish labor market momentum will make remaining sidelined increasingly uncomfortable, according to the bank.