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Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud

Bottom line

Today’s Labour Force Survey data shows a continued improvement in the labour market in December. The level of employment is now above its pre-pandemic level for some months and unemployment has fallen below 6%. While the recovery is expected to continue, the re-imposition of restrictions to slow the spread of the Omicron variant is likely to take a temporary toll on economic activity and the labour market in January, as we have seen in previous waves.

With this in mind, it is clear the Bank of Canada is unlikely to start increasing rates at its January meeting, preferring to have a clearer view of the impact of the new restrictions on the economy. Therefore, we continue to believe the BoC will start its hiking cycle at the April 2022 meeting, raising its policy rate by 0.25%.

Alberta saw another robust gain in employment in December. With this gain, the province has seen the second strongest job gains of all Canadian provinces in 2021, with a rise in employment of 6.0% since December last year compared to 4.8% nationally. The unemployment rate also declined below its pre-pandemic level for the first time. However, this is partly the result of workers leaving the labour market, as shown by the participation rate and employment rate remaining below their pre-pandemic level. We expect the labour market in the province to continue to improve. As such, the continued record value of oil production in recent months should broadly support the economy and the labour market.

 

 

Employment rose by 54.7k in December as the economy continued to recover. The level of employment is currently 1.3% above where it was at the onset of the pandemic. As a result of the increase in employment, the unemployment rate inched lower to 5.9% from 6.0%. This is the lowest level since the start of the pandemic, but still 0.2 percentage points higher than in February 2020. The participation rate remained unchanged at 65.3%, slightly below the level it was before the pandemic. The employment rate, the share of the population holding a job, edged higher to 61.5%, the highest since the start of the pandemic but still 0.3 percentage points (pp) below its pre-pandemic level. This suggests there is still some recovery to get the labour market back to where it should have been in the absence of the pandemic.

The details show that the job gains in December were all full-time (+122.5k), while there was a loss in part-time jobs (-67.7k). In addition, the job creation was in the public sector (+31.6k), private sector (+17.4) and more marginally in self-employed (+5.6k).

 

 

On an industrial level, the increase in employment was mostly in the goods-producing  sector (+44.2k), while employment in the service sector also increased (+10.6k).

The robust gains in the goods-producing sector is the second in a row and comes after months of anemic employment growth in the sector. The details show that the gains were broad-based, led by construction (+27k) and manufacturing (+10.5k).

The rise in the service industry was mixed, with strong gains in education (+17k), other services (+8k) , and business, building and other support service (+7k) offset by losses in finance, insurance and real estate (-11k), information, culture and recreation (-4.5k), and health care (-4k).

Despite the strong gains in overall employment and an overall level of employment back above its pre-COVID level, only 10 out of 16 industries have a level of employment above their pre-pandemic level. These sectors are natural resources, utilities, manufacturing, trade, finance, insurance and real estate, professional, scientific and technical services, education, health care, information, culture and recreation, and public administration. Nevertheless, some sectors continue to lag behind the rest of the economy. However, with restrictions being eased significantly, the accommodation and food services is no longer the worst performing industry since the start of the pandemic (17% below its pre-pandemic level). Employment in the agriculture sector is currently almost 20% below its pre-COVID-19 level.

 

 

In Alberta, employment increased 11.1k in December. The level of employment is 0.9% (or 21k) above its pre-pandemic level. With the job gains, the unemployment rate declined to 7.3% from 7.6%, below where it was at the onset of the pandemic for the first time. The participation rate edged higher to 69.3% from 69.2%, still almost 1 percentage point below its pre-pandemic level. The employment rate, the share of the population holding a job, increased to 64.2%, its highest since the start of the pandemic but still almost 1 percentage point below its February 2020 level.

The job gains in Alberta were in the goods-producing sector (+6k), service sector (+4k) and natural resources (+4k), while there were losses in utilities (+2k) and agriculture (-1k).

The job performance in the service sector was mixed. Gains in health care (+4k), accommodation and food services (+5k), other services (+4k), public administration (+3k), and professional, technical and scientific services (+3k) were partly offset by losses in trade (-6k), finance, insurance and real estate (-4k), transport and warehousing (-2.5k) and education (-2.5k).

 

 

Despite the job gains in December and overall employment being above its pre-COVID level, only 9 out of 16 industries have a level of employment above their pre-pandemic level. Those industries are: natural resources, construction, trade, transport and warehousing, finance, insurance and real estate,  professional, technical and scientific, education, health care and public administration. Employment in the accommodation and food services sector, the worst-hit industry, remains almost 30% below its pre-COVID-19 level, under performing the rest of the country.

On a regional basis[1], since the data is published on a three-month average basis, the numbers still include some of the impact of the fourth wave (see table below). Over the past three months, the province gained 4.5k jobs, with increases in most regions, except in Lethbridge-Medicine Hat (-1.8k) and Camrose-Drumheller. Employment rose the most in Edmonton (+2.1k) and Calgary (+1.4k).

 

 

Compared to the pre-pandemic levels, employment is the lowest in Camrose-Drumheller (-12.7%), Lethbridge-Medicine Hat (-6.4%), Wood Buffalo-Cold Lake (-4.0%), and Western Alberta (-3.1%). Edmonton (+2.3%), Calgary (+1.5%) and Red Deer (+0.2%)  are the only regions where employment is above their pre-pandemic level.

The unemployment rate for the province as a whole declined to 8.0% from 8.2%. However, there were increases in Wood Buffalo-Cold Lake (+0.8pp), Lethbridge-Medicine Hat (+0.6pp), Red Deer (+0.4pp) and Calgary (+0.2pp). On the flip side, the unemployment rate decreased in Edmonton (-0.7pp) and Western Alberta (-0.1pp). The unemployment rate is the highest in Camrose-Drumheller (9.7%), Calgary (8.6%), and Red Deer (8.1%). It is the lowest in Lethbridge-Medicine Hat (6.8%), Western Alberta (7.4%) and Edmonton (7.5%).

The employment rate for Alberta was unchanged at 63.3%. It improved in Western Alberta, Wood Buffalo-Cold Lake and Edmonton but deteriorated elsewhere, led by Lethbridge-Medicine Hat and Camrose-Drumheller.

 

 

[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.

 

Independent Opinion

The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.

Alberta Central member credit unions can download a copy of this report in the Members Area here.

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