A Great Canada Jobs Report for March but Head Scratchers Galore

Article source: CMDGroup

There’s going to be a lot of cheering about Canada’s March labour market numbers as reported by Statistics Canada. The latest Labour Force Survey shows a month-to-month pick-up in total employment of 41,000 positions and a jobless rate that fell 0.2 percentage points to 7.1% from 7.3% in February.

Furthermore, most of the overall jobs increase (+35,000) occurred in the usually more stable and higher-paying, and thus better quality, full-time category of work as opposed to part-time (+6,000) activities.

Plus, all the boost to employment was provided by the private sector (+65,000), as the public sector downsized slightly (-2,000). Self-employment (-22,000) staged a significant retreat.

Still, there were some real oddities in the rest of the figures.

In nominal terms, jobs in goods production (-34,000) contracted by about half the amount that they expanded in services (+75,000).

The employment slide in goods output was almost entirely due to staffing cutbacks by manufacturers (-32,000). That’s not what’s supposed to be happening.

Canada’s depreciated loonie – i.e., it is currently valued at about 76 cents to the U.S. dollar − is supposed to be acting as a big spur to export sales.

There’s also a flip side that sees imports becoming pricier and less attractive to Canadian purchasers, and thus providing more of a boost to domestic sourcing.

The latest (February) merchandise trade numbers for Canada showcased exports at -5.4% month to month and imports at -2.6%. Their respective year-over-year performances were +2.1% and +2.3%.

The biggest problem for Canadian exports has arisen in the energy sector, where product shipments, almost entirely to the U.S., were -37% year over year in February, in current (i.e., not adjusted for inflation) dollars.

Canadian exports of motor vehicles and parts in February, again almost exclusively to the U.S., were up a remarkable +46% year over year.

Statistics Canada’s latest (January) Monthly Survey of Manufacturing highlights a total sales gain in that sector of +2.3% month to month and +5.6% year over year. In fact, manufacturing sales north of the border are now at their ‘highest level on record’, according to the press release from Ottawa’s official statistical agency.

Some of the top year-over-year revenue gainers have been recorded in ‘motor vehicles’ (+37%), ‘ship and boat building’ (+26.5%), ‘furniture and related products’ (+13.3%), ‘wood products’ (+10.3%) and ‘food manufacturing’ (+6.9%).

‘Petroleum and coal products’ (-17.3%), not surprisingly, have acted as a major drag.

In summary, there are definite indications that Canadian manufacturing is now skipping to a livelier beat, but it seems little of that improvement has been translating into hiring increases along manufacturers’ assembly lines.

Year-over-year Canadian manufacturing employment is almost neutral, at +0.5%.

The construction sector’s year-over-year employment tally has been similarly modest, +0.4%.

Canada Mortgage and Housing Corporation (CMHC) has released its March housing starts data on the same day and at the same time as Statistics Canada’s labour market report.

The monthly average of new home starts so far this year has been 199,400 units annualized, a decent step up of +13.9% compared with 175,000 units through the first quarter of last year.

The seasonally adjusted and annualized monthly numbers in Q1 of 2016, however, have bounced around a fair bit – 175,000 units in January; 219,000 in February; and 204,000 in March.

If they are to contribute in a meaningful way to additional construction employment, they’ll have to consistently exceed 200,000 units and that may be a stretch.

Among the provinces, British Columbia (+54%), Ontario (+29%) and Quebec (+27%) have been the leaders in year-to-date new home starts. Alberta (-53%), where the depressed global price of oil is hammering key parts of the local economy, is experiencing a severe cut in housing starts in 2016’s early going.

Alberta’s big drop in housing starts fits the currently prevailing narrative. But here’s something that doesn’t. Among all the provinces, the biggest month-to-month increase in employment in March was recorded in Alberta (+19,000).

Ontario (+14,000) was second in line, with B.C. (+9,000) third.

Alberta’s unemployment rate improved dramatically from 7.9% in February to 7.1% in March, the same as the national average.

Hopefully, this won’t take away from Premier Rachel Notley’s recently more aggressive assertions about the need for an oil pipeline from her province to a tidewater port, if Alberta is to return to success in helping underpin the Canadian economy as a whole.

Of course, construction owners and employees (both existing and potential) across Canada are also eagerly awaiting a start-up on the massive infrastructure repair and expansion program promoted by the governing Liberals, under Prime Minister Justin Trudeau, both during last fall’s election campaign and in this spring’s federal budget.

The lowest provincial unemployment rate in Canada at this time is in Manitoba (6.0%), with Saskatchewan (6.2%) and B.C. (6.5%) offering the closest competition.

Probably not enough attention is being paid to jobs provided by Canadian service-producers. They do, after all, account for nearly 80% of the total.

The three biggest contributors to the 75,000 increase in services jobs in March were ‘health care and social assistance’ (+25,000 and +3.4% y/y), ‘accommodation and food services’ (+18,000, but -2.2% y/y) and ‘professional, scientific and technical services’ (+12,000 and +3.8% y/y).

The second or middle of those categories, through foreign tourism and business travel, should be a prime beneficiary of Canada’s bargain-priced currency.

The nation’s total jobs increase year over year in March was +0.7%. With ‘goods’ jobs flat (0.0%), ‘services’ (+0.9%) came through as the savior.

In its press release, Statistics Canada makes the special point that if it calculated the unemployment rate according to the same strict requirements about who is really truly looking for work as are adopted in the U.S., the country’s jobless rate would be scaled back from 7.1% to 6.1%.

That would cut in half the gap with America’s 5.0% jobless rate.

Tags: Alex Carrick, Canada, CMD, CMDGroup, Economy, employment, job, jobless, market, unemployment

Category: CMD Group

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