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 points to a continued softening in Canada’s labour market, with job gains remaining weak. This is especially true since without the strong gains in professional, technical and scientific services, employment would have shown a sizeable decline in December.
The report also showed that wage growth for permanent workers jumped higher to 5.7%, its highest since the start of the post-pandemic recovery. While this surge in wage growth can be traced to a base effect and a change in the composition of the job market, we estimate that the 3-month annualized change of the seasonally-adjusted series eased to 4.1%. Nevertheless, wage growth and its momentum for various wage measures remain elevated.
The Bank of Canada is likely to take note of the rise in wage growth and the continued strong momentum, despite the special factors, especially as wages continue to grow at levels that are disconnected from productivity gains. However, the weakness in job creation continues to suggest that some slack is building up in the labour market, which should help ease some of the wage pressures.
Recent comments suggest that the central bank believes rates are restrictive enough. In our view, the attention is now on the timing for a rate cut. As we have shown previously (see What happened to the recession? The role of the policy stance and demographic), monetary policy entered restrictive territory in late 2022. Historical patterns suggest a downturn usually follows 5 to 7 quarters later, suggesting very weak growth in early 2024.
We think the BoC is unlikely to contemplate rate cuts until inflation has been brought sustainably below 3%. This is unlikely to happen until the late-Spring. However, the timing of the first rate cut could be brought forward if growth slows more than expected in the coming months, suggesting a harder landing.
Whether the country experiences a soft or hard landing depends heavily on the health of the evolution of the labour market ie whether we see a hiring freeze or broad-based layoffs as the economic activity slows further (see Will it be a hard landing or a soft landing? The labour market will decide).
Alberta saw a small increase in employment in December of 8.9k. Nevertheless, the unemployment rate rose as the gain were weaker than the increase in working-age population.
Over the past twelve months, the Alberta labour market has been robust, looking at job gains (+94k). However, the unemployment rate in Alberta remains higher than the national measure, partly due to the strong population growth. Interestingly, wage growth in Alberta (+4.9% y-o-y) underperformed once again the rest of the country (see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations).
Employment was mostly unchanged in December (+0.1k), weaker than expectations. Despite the weak gain in employment, the unemployment rate was unchanged at 5.8%, due to a decline in the participation rate to 65.4% from 65.6%. The employment rate, the share of the population holding a job, edged lower to 61.6%, its lowest level since early 2022.
Wage growth for permanent workers jumped to 5.7% from 5.0% y-o-y. However, the 3-month annualized change in wages eased to 4.1%, suggesting that wage growth continues to decelerate after some months of strong increases. Moreover, a base effect and the jump in employment in the professional, scientific and technical sectors, highly paid jobs, explains most of the increase in y-o-y wage growth. Nevertheless, wage growth across a broad spectrum of measures remains elevated.
The details show that the losses full-time jobs (-23.5k) in December almost fully reversed the gains in part-time jobs (+23.6k). In addition, the higher employment was mostly in the private sector (+10.9k) and public sector (+6.8k), while there was a decline in self-employed (-17.6k).
On an industrial level, the employment gains were all in the service sector (+43.1k), while jobs in the goods-producing sector declined (-42.9k).
The details in the good-producing sector show that the job losses were mainly in manufacturing (+28.4k), agriculture (-17.7k), and construction (-13.9k). This was partly offset by small job gains in natural resources extraction (+4.4k), and utilities (+2.6k).
The gains in the service industry were concentrated in professional, scientific and technical services (+45.7k), health care (+15.5k), and other services (+12.0k). Losses in trade (-20.6k), business, building and other support services (-13.6k), and transport and warehousing (-4.4k) partly offset the gains.
At a provincial level, the job gains were mainly seen in BC (+17.7k, +0.6 m-o-m), Quebec (+9.8%, +0.2% m-o-m), Alberta (+6.7k, +0.3% m-o-m), and Nova Scotia (+6.3k, +1.3% m-o-m). There were losses in Ontario (-48.0k, -0.6 m-o-m) and New Brunswick (-0.3k, -0.1% m-o-m).
The unemployment rate rose was mixed across provinces, with the biggest increases in Newfoundland (+0.7pp), Alberta (+0.4pp), and BC (+0.3pp), while it declined the most in Nova Scotia (-0.8pp), Manitoba (-0.7pp), and Quebec (-0.5pp).
The unemployment rate is the highest in Newfoundland (+10.7%), PEI (8.1%), New Brunswick (+6.6%), Alberta (+6.3%), and Ontario (+6.3%). It is the lowest in Manitoba (4.2%), Quebec (4.7%), Saskatchewan (5.0%), and BC (+5.6%).
Wages increase the most in BC (+7.2% y-o-y), Nova Scotia (+7.2% y-o-y), Ontario (+6.7 % y-o-y), and New Brunswick (+5.8% y-o-y). It increased at the slowest pace in Saskatchewan (+2.2% y-o-y), Quebec (+3.7% y-o-y), Newfoundland (+3.7% y-o-y), and PEI (4.3% y-o-y).
In Alberta, employment increased 6.7k in December. Despite the job gains, the unemployment rate edged higher to 6.3% from 5.9%, its highest since February 2022. This reflects an increase in the participation rate to 69.7% from 69.4%. The employment rate, the share of the population holding a job, was unchanged at 65.3%.
The job gains in Alberta were mainly in the private sector (+23.0k), while there were some losses in self-employed (-13.5k) and the public sector (-2.9k). All the gains were in the service sector (+18.0k), while the goods-producing sector (-13.5k) saw lower employment.
The decrease in the goods-producing industry was broad-based, led by manufacturing (-6.0k), construction (-4.9k), and agriculture (-2.9k). The only sector with higher employment was utilities (+0.8k).
The higher employment in the service sector was relatively broad-based, with 8 of the 11 subsectors showing an increase. The biggest job gains were in other services (+6.9k), professional, scientific and technical (+6.1k), education (+4.8k), and trade (+3.6k). These increases were partly offset by losses in transport and warehousing (-2.1k), public administration (-1.0k), and health care (-0.8k).
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 12.8k jobs each month on average. The increases were mainly in Lethbridge-Medicine Hat (+4.9k), Calgary (+3.8k), Western Alberta (+3.7k), and Red Deer (+2.8k). There were some losses in Edmonton (-6.2k) and Wood Buffalo-Colkd Lake (-0.4k).
The unemployment rate for the province rose to 5.6% on average over the past three months. The unemployment rate increased in most regions except Wood Buffalo-Cold Lake (-0.4pp), Calgary (-0.2pp), and Western Alberta (-0.1pp). The biggest increases were in Lethbridge-Medicine Hat (+1.2pp), Camrose-Drumheller (+0.6pp), and Edmonton (+0.5pp). The unemployment rate is the highest in Red Deer (7.9%), Edmonton (6.3%), and Lethbridge-Medicine Hat (5.5%). It is the lowest in Camrose-Drumheller (3.1%), Western Alberta (+4.3%), and Wood Buffalo-Cold Lake (4.6%).
The employment rate for Alberta edged higher to 64.8%. The employment rate improved the most in Lethbridge-Medicine Hat (+1.8pp), Red Deer (+1.4pp), Western Alberta (+1.2pp), and Camrose-Drumheller (+1.2pp). It increased in Edmonton (-0.6pp) and Wood Buffalo-Cold Lake (-0.6pp).
[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.
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