August 5, 2025 | Collapse in Job Creation

Canada’s seasonally adjusted job vacancy rate fell to 2.7% in May, down 10 basis points (bps) from April and -50 bps year over year, reaching an 8-year low, significantly below pre-pandemic levels (red shown below since 2015, courtesy of BMO and Better Dwelling.com, with the US job opening rate in blue).
Official unemployment rates are lagging indicators, but they have increased significantly from cycle lows in both Canada and America, and, if not for immigration outflows in both countries, would be higher at this point in the cycle.

The good news is that weakening labour markets reduce demand and overall inflationary pressures, opening room for monetary easing. Market expectations for rate cuts have risen sharply on the latest labour data weakness. Government bond prices have risen (yields have fallen) in agreement.

The bad news is that, as with monetary tightening, easing takes quarters to move through the economy, and job losses typically rise throughout.

At some point in every cycle, slumping demand undermines overzealous sentiment and highly leveraged asset prices.

Rosenberg Research conducted a deep dive into the latest employment data in this morning’s note, pointing out that for those of us paying attention, last week’s negative employment revisions were consistent with many other real-time readings year-to-date.

The ever-complacent risk-on investment community may be interested to know that over the past six decades, the type of collapse in the pace of job creation to stall-speed we just endured over the last three months foreshadowed an imminent recession with 100% accuracy. Word to the wise.

Danielle Park August 5th, 2025

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