What do economists make of the latest labour market data?
Canada’s jobs report was published on Friday, revealing a mixed picture of the labour market but with underlying softness.
Among the industries that contributed to a new 22,000 new jobs in August was finance, insurance, real estate, rental and leasing (11K), surpassed only by wholesale and retail trade (14K), health care and social assistance (25K), and educational services (27K).
But the Statistics Canada data shows that there was little change month-over-month (0.1%) for Canadian employment (for the fourth consecutive month) and the overall employment rate was down 0.1 percentage points to 60.8%, while the unemployment rate was up 0.2 percentage points to 6.6%.
Meanwhile, average hourly wages were up 5% to $35.16 on a year-over-year basis, down slightly from the previous month’s annualized rate of 5.2% (not seasonally adjusted).
The stats also show that gains of 66,000 in part-time work were offset by a decline of 44,000 for full-time jobs.
Gains were concentrated in the core working age group (men and women) with 25-54-year-olds seeing a 20,000 increase in August. Looking at the previous 12 months, men in this age group gained 207,000 jobs while women gained 115,000. For both younger and older Canadians there was little change in employment growth.
With rise in unemployment was mostly in core-aged and older men, with other demographic groups largely unchanged, although returning students found employment harder to find over the summer.
Economists’ reaction
Some of Canada’s big bank economists gave their reaction to the jobs data.
“Canadian labour markets continue to soften. Much of the unemployment rate increases to-date have come from longer job searches for new labour market entrants (particularly students) but layoffs are also rising under the surface,” said Nathan Jantzen of RBC Economics. The team there expects a further rate cut from the Bank of Canada in October following last week’s cut.
“This continued weakening in the job market suggests slack continues to build in the labour market, pointing to the need for further interest rate cuts,” said TD Economics’ Leslie Preston who expects two more rate cuts this year. “The labour market is giving the OK for the Bank of Canada to continue its gradual quarter-point cut per rate announcement pace.”
Andrew Grantham at CIBC Economics does not believe the elevated pace of wage growth is cause for concern, given that other measures of wages such as productivity remain soft. But he notes that the unemployment will inform rate cut decisions: “We have one more jobs report to come before the October decision, and for now we are sticking to our previous forecast for consecutive 25bp cuts at the remaining meetings this year.”
But Scotiabank’s Derek Holt highlighted the resilience of the Canadian jobs market and how bias will shape people’s interpretation of the data: “if you want rates to go down sharply and quickly then you hated them, but if you like a resilient consumer then you welcomed it.” He also expressed concern about wage growth and its impact on businesses’ margins which could force prices higher, increasing inflation risk.
