Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud. This report includes regional details for Alberta.
Bottom line
Today’s Labour Force Survey data suggest the labour market in Canada remains strong and resilient. The low unemployment rate continues to signal that the labour market remains very tight, something the Bank of Canada is closely monitoring. Moreover, the report also shows that wage growth, while slowing, remains robust, with average wages increasing by 4.2% y-o-y.
A robust labour market is a challenge for the Bank of Canada. As we have explained on numerous occasions, the BoC needs to slow growth and create some excess capacity in the economy to fight inflation. This will likely lead to a rise in the unemployment rate and job losses. With this in mind, continued strength and tightness in the labour market may not be a welcomed outcome for the BoC.
The continued resilience of the labour market raises the odds that the BoC will increase its policy rate at its next meeting on March 8. However, whether the BoC hikes further depends on inflation, with the next release on February 21, and the growth outlook. Nevertheless, it may require some signs that underlying inflationary pressures are not moderating as quickly as expected for the BoC to hike at the March meeting.
Alberta saw a strong gain in employment in January. Moreover, while the unemployment rate rose to 6.0%, the increase was mainly the result of more workers joining the labour force, likely the result of strong migration into the province. Nevertheless, we continue to note that the unemployment rate in Alberta remains higher than the national measure. As a result, we observe some continued notable underperformance in wage growth in Alberta at 1.5% y-o-y, compared to 4.5% y-o-y in the rest of Canada.
Employment jumped higher by 150.0k in January, much higher than expectations. Despite the strong rise in employment, the unemployment rate remained unchanged at 5.0% as a result of an increase in the participation rate to 65.7% from 65.4%. The participation rate is still 0.2 percentage points (pp) lower than before the pandemic, as workers left the labour force. If the participation was the same as before the pandemic, the unemployment rate would be 5.2%. The employment rate, the share of the population holding a job, increased to 62.5% from 62.1%, above its pre-COVID level and the highest since May 2019. Wage growth decelerated slightly to 4.5% y-o-y from 4.7% y-o-y.
The details show that the job gains in January were mostly full-time (+121.1k) with a solid gain in part-time too (+28.9k)). In addition, the rise in employment was mainly in the private sector (+114.7k) and public sector (+31.5k) with a marginal gain in self-employed (+3.7k).
On an industrial level, the increase in employment was in both the service sector (+124.7k) and the goods-producing sector (+25.4k).
The details in the good-producing sector show that most of the job gains were relatively broad-based with gains in construction (+16k), manufacturing (+7k), and utilities (+5k), while there was a small loss in agriculture (-4k).
The increase in the service industry came from strong gains in trade (+59k), health care (+40k), education (+18k), other services (+16k), and accommodation and food services (+12k). These gains were partly offset by losses in transport and warehousing (-17k), business, building and support services (-7k), and public administration (-4k).
Despite the overall level of employment being above its pre-COVID level by 4.2 percentage points, only 10 out of 16 industries have a level of employment above its pre-pandemic level. The lagging sectors are: agriculture, trade, transport and warehousing, business, building and other support services, accommodation and food services, and other services. Employment in the accommodation and food services is still almost 10% below its pre-COVID-19 level.
In Alberta, employment increased by 20.7k in January, the strongest since February 2022. Despite the gains in employment, the unemployment rate rose to 6.0% from 5.6%. This is the result of strong increase in the participation rate to 70.3% from 69.6%. Despite the sharp rise in recent months, the participation rate in the province is still 0.8 percentage points (pp) below its pre-pandemic level suggesting many workers are remaining on the sidelines. If the participation rate was at the same level as before the pandemic, the unemployment rate in the province would be 7.1%. The employment rate, the share of the population holding a job, increased to 66.1%, marginally above its pre-pandemic level.
The job gains in Alberta were concentrated in the goods-producing sector (+13.6k), with some modest gains in the service sector (+7.1k). The increase in the goods-producing industry was broad-based and led by construction (+4k), utilities (+3k), and natural resources extraction (+3k).
The higher employment in the service sector was led by gains in professional, scientific and technical services (+10k), trade (+9k), health care (+4k) and public administration (+3k). These increases were partly offset by losses in transportation and warehousing (-11k), other services (-5k) and accommodation and food services (-3k).
With the overall employment being above its pre-COVID level by 5.5pp, 9 out of 16 industries have a level of employment above its pre-pandemic level. The lagging industries are: agriculture, natural resources, utilities, manufacturing, information, culture and recreation, accommodation and food services, and other services. Employment in the accommodation and food services sector, the worst-hit industry, remains more than 15% below its pre-COVID-19 level. Employment in the manufacturing sector is 4% below its pre-covid level, underperforming the rest of the country.
On a regional basis[1], the data is published on a three-month average basis (see table below). Over the past three months, the province gained 13.3k jobs. Most of the gains were in Edmonton (+17.0k), with some more marginal gains in Lethbridge-Medicine Hat (+3.0k), Camrose-Drumheller (+1.5k), and Wood Buffalo-Cold Lake (+1.1k). Employment declined in Calgary (-5.0k) and Red Deer (-0.8k).
Compared to the pre-pandemic levels, all regions have employment above the pre-covid levels, except for Wood Buffalo-Cold Lake where it is marginally below its pre-pandemic level (-0.1%). Employment exceeds pre-covid levels the most in Red Deer (+5.9%), Calgary (+5.8%), Edmonton (+5.4%), and Camrose-Drumheller (+4.6%).
The unemployment rate for the province inched higher to 5.8%, but the regional performance was increased in most regions, with a lower unemployment rate only in Camrose-Drumheller (-0.3pp). The higher unemployment rate was led by Edmonton (+0.7pp), Calgary (+0.7pp), Wood Buffalo-Cold Lake (+0.5pp) and Lethbridge-Medicine Hat (+0.4pp). It is important to note that the rise in the unemployment rate is partly the result of a higher participation rate in many regions.
The unemployment rate is the highest in Red Deer (+7.7%), Calgary (+6.4%) and Edmonton (5.8%). It is the lowest in Camrose-Drumheller (3.0%), Lethbridge-Medicine Hat (3.7%), and Wood Buffalo-Cold Lake (4.9%).
The employment rate for Alberta inched higher to 65.2%. The employment rate rose the most in Lethbridge-Medicine Hat (+1.1pp), Edmonton (+1.1pp), Wood Buffalo-Cold Lake (+1.0pp), and Camrose-Drumheller (+0.8pp). It decreased in Red Deer (-0.6pp) and Calgary (-0.5pp).
[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.