Canada: Modest Employment Rebound in August

Daily Forex Fundamentals | Written by TD Bank Financial Group | Sep 05 08 14:40 GMT |

15,200 jobs added in August after a dismal 55,200 loss in July; Unemployment rate stays at 6.1% After contracting for two consecutive months and a cumulative employment loss of 60,200, the Canadian labour market started to claw its way back in August. The latest tally reaffirmed our expectation that the massive drop in July overstated the weakness in the labour market, while also reminding us that the job boom of 2006-07 is done. All net jobs created in August were full-time positions, which had been declining since May. A second bit of good news is that the private sector contribution of 40,900 jobs managed to erase nearly half of July’s loss in that sector. Unfortunately, the public sector did not share in the gains, but the 23,900 jobs lost were not enough to erase July’s 29,500 gain. Since early 2007, the public sector had been contributing a much higher share of job gains than its economic weight, so a rebalancing between private and public sector is in order. Another reflection of this is that the service sector – which had been the bulwark of the labour market since late 2007 – saw no job creation on a net basis and has been shrinking for the last four months. While job losses were widespread within services, they were concentrated in health care and public administration. The current weakness in private services employment is likely overstated, and we look for modest growth from that sector going forward. The one public sector that fared well in August was education, with a 30,000 gain which erased July’s loss. Construction, which has been on a tear since mid-2006 and leads the way so far this year, added 18,500 jobs to the tally, mostly in non-residential projects in Ontario, B.C, and Alberta. Meanwhile, the manufacturing sector managed to add a surprising 13,800 jobs, which goes to show that attention grabbing headlines are no substitute for the overall big picture. Yes, times are definitely tough in manufacturing, but the net monthly job loss since January averages a surprisingly low 1,750. On a regional basis, employment gains favoured Ontario (14,000) and Saskatchewan (6,100), but was left nearly unchanged in every other province. Québec’s unemployment rate moved up significantly to 7.7% (from 7.4%), its highest in 18 months, as a result of few jobs created (3,800) but a fair number (15,100) of labour force entrants. Nationally, however, the employment gain was enough to prevent the low national unemployment rate (6.1%) from edging higher. Wages were 3.8% higher than a year-ago, slightly ahead of July’s CPI inflation rate of 3.4%. Overall, this report should help restore some confidence that Canada’s labour market is not headed for massive job losses like that recorded in July. It also points to easing inflationary pressure on the wage front. Both are positive takeaways for the Bank of Canada. Reading through the monthly volatility which will likely record other modest job losses in upcoming months, we expect only very modest trend growth in employment around 0.5% (Y/Y) over the next 5 quarters. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.