The AEC Lens
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »
Canada’s January Jobs Report Shocks on the Downside
February 8th, 2018 by Alex Carrick, Chief Economist at ConstructConnect
Article source: ConstructConnect
After exceptional increases in total employment in the final two months of last year – i.e., +81,000 jobs in November and +65,000 jobs in December − January of 2017’s figure of -88,000, as just reported for Canada by Statistics Canada, is a major shock.
The foregoing numbers are based on seasonally adjusted (SA) data. SA versus NSA (not seasonally adjusted) will become important as this article unfolds.
To lose 88,000 jobs when year-over-year GDP has been growing nicely, at a pace of about +3.0%, is quite another matter.
Furthermore, the composition of that drop seems unusual. There was a +49,000 gain in full-time work that was overwhelmed by a -137,000 step-down in part-time jobs.
At no other time since the turn of the century has the month-to-month retreat in part-time jobs been as dramatic as -137,000. The sharpest decline prior to the latest month was only 60% as bad, at -78,000 in March 2011.
December is the month of the year when part-time employment soars the most as businesses hire temporary workers to handle shoppers’ purchases prior to the traditional gift-giving season. Once the holidays are over, many of those seasonal-specific positions quickly disappear.
But that’s why the numbers are run through a seasonal adjustment process. SA as opposed to NSA statistics are supposed to smooth out weather-related and other unusual time-of-the-year wild swings.
Therefore, it’s not unreasonable to wonder if the formula being used to account for seasonality in Statistics Canada’s latest jobs report is failing to perform as well as it should.
Part-time employment (SA) in the provinces is set out in Statistics Canada’s Cansim Table 282-0087. Three provinces accounted for 90% of the decline in part-time employment in January: Ontario (-59,300); Alberta (-33,400); and Quebec (-31,200). Manitoba swam against the current and managed an increase (+4,000).
Is it possible part-time employment fell because much of it was converted to full-time jobs? Such a scenario is not borne out by the background numbers in either Quebec or Ontario. In the former, the part-time to full-time jobs comparison was -31,000 to only +14,000. In the latter, the disparity was even greater, -59,000 to a meagre +9,000.
In Alberta, though, there was closer alignment, -33,000 part-time jobs almost matched by +28,000 full-time jobs.
The nation-wide unemployment rate in Canada in January 2017 stayed tight, even though it was a slight notch worse, at 5.9%, than December 2016’s 5.8%. In the last section of the written commentary accompanying the Labour Force Survey report, Statistics Canada points out that if its jobless figure were to be reported according to the same rigid standards as are adopted in the U.S. (i.e., with respect to who is truly out of work), it would be a considerably lower and more attention-grabbing 4.9%. (The U.S. jobless figure is presently 4.1%.)
With respect to other Canada-versus-U.S. jobs comparisons, some key year-over-year percentage changes are as follows: Canada is leading in ‘total’ jobs, +1.6% versus +1.5% for the U.S., and in manufacturing jobs, +5.1% versus +1.5%. But the U.S. is ahead in services-providing work, +1.6% versus +1.2% for Canada, and in on-site construction work, +3.3% versus +2.4%.
The Canadian construction sector in January shed 15,000 jobs. The NSA unemployment rate in Canadian construction in the first month of this current new year was 10.5%. While that sounds high, it was an improvement on January 2017’s level of 11.8%.
Verification that winter weather in Canada plays tremendous havoc with construction activity can be found in the NSA jobless rates for the sector in the various provinces.
From Cansim Table 282-0007, Newfoundland and Labrador’s present construction unemployment rate is a truly elevated 39.7%. The other Atlantic Region provinces are also experiencing exaggerated highs: New Brunswick, 27.5%; Prince Edward Island, 20.9%; and Nova Scotia, 19.7%.
Most of the other provinces are also in double-digits: Saskatchewan, 15.4%; Quebec, 13.2%; Manitoba, 11.6%; and Alberta, 10.8%. Only Ontario, at 7.9%, and B.C., at 4.5%, have NSA construction unemployment rates that appear almost spring-like.
The latest jobs numbers provide an additional justification for the Bank of Canada to be super-cautious in raising interest rates further. Besides the latest misstep in jobs creation, the BOC must be concerned about the long-term shape and/or viability of NAFTA and the direction that stock markets have been taking lately.
In the U.S., the Dow Jones Industrial (DJI), Standard & Poor’s (S&P) 500 and NASDAQ indices all reached record highs on January 26, 2018. Since then, and as of February 8’s closing, the DJI is -10.4%; the S&P 500, -10.2%; and NASDAQ, -9.7%. In ‘market’ parlance, -10% is a ‘correction’; -20% is a ‘bear’.
The Toronto Stock Exchange (TSX) is down from a January 4 peak, but not to quite the same degree, -8.3%.
It’s easy to argue that an adjustment in equity prices was inevitable. Since early 2009, the DJI has grown by +11.0% annually compounded; the S&P 500 by +12.3%; and NASDAQ by +15.8%. The TSX has been the laggard, with a year-over-year gain of only +4.4% compounded.
It’s almost unbelievable that those kinds of out-sized gains have been sustained for nine years.
Still, until share prices settle down again and a next upbeat wave begins, the investor community will be plagued with twinges of anxiety.
Returning to the provinces for a few closing comments, from Quebec headed west to the Pacific Coast, with the single exception of Alberta, all-worker unemployment rates are low, less than 6.0%. B.C. is best at 4.8%, followed by Quebec along with Saskatchewan at 5.4%. Ontario’s level is 5.5% and Manitoba’s, 5.6%.
Alberta, with a current unemployment rate of 7.0%, is still recovering from the negative effects of mid-2014’s plunge in the world price of oil. In a remarkable show of resilience, however, the province’s jobless rate has dropped by 1.7 percentage points over just the last 12 months
Labour Force Survey: http://www.statcan.gc.ca/daily-quotidien/180209/dq180209a-eng.pdf