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 some softening in Canada’s labour market, with weaker than expected job gains and a rise in the unemployment rate to 5.7%. Moreover, unchanged hours worked suggest that economic activity remained modest in October.
The report also showed that wage growth moderated to 5.0% and we estimate that the 3-month annualized change of the seasonally-adjusted series dropped to 5.4%, still high.
The Bank of Canada will take comfort in seeing a deceleration in wage gains, but wages continue to grow at levels that are disconnected from productivity gains. Moreover, the rise unemployment rate suggests that some slack is gradually building up in the labour market, which should help ease some of the upside pressures on wages.
With some progress made in October to create some slack in the labour market and slower wage growth, the likelihood of further rate hikes in the near future has diminished. Our view remains that the policy rate has likely peaked and that the Bank of Canada will stay on the sideline and watch previous rate increases work their way through the economic system and reduce inflationary pressures.
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 late this year and early next year. With inflation expected to ease accordingly, this suggests that some easing in mid-2024 is likely.
Alberta saw a big jump in employment in October of 37.7k, reversing the decline seen in September. Nevertheless, the unemployment rate rose slightly as the gains were weaker than the gains in working-age population. The gain in employment is relatively broad-based, suggesting a robust economy.
Over the past twelve months, the Alberta labour market has been robust in terms of job gains. However, the unemployment rate in Alberta remains higher than the national measure, partly due to the strong population growth. Interestingly, wage growth in Alberta (+6.2% y-o-y) outperformed significantly the rest of the country for the first time since the pandemic(see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations).
Employment rose by 17.5k in October, weaker than the consensus but in line with our expectations. With the gain in employment weaker than the increase in working-age population, the unemployment rate rose slightly to 5.7% from 5.5%, while the participation rate was unchanged at 65.6%. The employment rate, the share of the population holding a job, edged lower to 61.9%.
Wage growth for permanent workers decelerated to 5.0% y-o-y. The 3-month annualized change in wages also decreased to 5.4%, suggesting that wage growth may be decelerating, after some months of strong increases.
The details show that the gains in October were mostly part-time jobs (+20.8k), while there were some marginal losses in full-time (+3.3k) jobs. In addition, the higher employment was mostly in the public sector (+18.9k), while it was mostly flat in the private sector (+0.2k) and self-employed (-1.7k). After being the main job generator over the past year, private sector jobs have stalled over the past 4 months.
On an industrial level, the employment gains were in both the goods-producing sector (+7.5k) in the service sector (+10.0k.
The details in the good-producing sector show that the job gains were mainly in construction (-(+23.0k), offsetting the loss seen in September. This was partly offset by job losses in manufacturing (-18.8k). The other goods-producing sectors were little changed.
The gains in the service industry were concentrated in information, culture and recreation (+20.9k) with some more modest gains in health care (+8.9k) and public administration (+6.0k). Losses retail and wholesale trade (-21.7k), finance, insurance and real estate (-8.1k) and accommodation and food services partly offset these gains.
At a provincial level, the job gains were mainly seen in Alberta (+37.7k, +1.5% m-o-m)), reversing the decline seen in September. There were also gains in Saskatchewan (+9.1k, +1.5% m-o-m) Nova Scotia (+8.2k, +1.7% m-o-m) and New Brunswick (+2.4k, +0.6% m-o-m). All the other provinces saw lower employment in October, led by Quebec (-22.1k, -0.5% m-o-m), Ontario (-14.3k, -0.2% m-o-m) and BC (-4.0k, -0.1% m-o-m).
The unemployment rate declined in 4 provinces in October, New Brunswick (-0.6pp), Saskatchewan (-0.5pp), Nova Scotia (-0.3pp), and PEI (-0.1pp). It increased the most in Quebec (+0.5pp), Newfoundland (+0.3pp), Ontario (+0.2pp), and Manitoba (+0.2pp).
The unemployment rate is the highest in Newfoundland (+10.0%), New Brunswick (+6.6), Nova Scotia (+6.6%), PEI (6.2%), and Ontario (+6.2%). It is the lowest in Saskatchewan (4.4%), Quebec (4.9%), Manitoba (+5.2%) and BC (5.4%).
Wages increase the most in BC (+6.7% y-o-y), Nova Scotia (+5.9% y-o-y), and Ontario (+5.6% y-o-y). It increased at the slowest pace in Saskatchewan (+2.9% y-o-y), PEI (+3.2% y-o-y), and Alberta (+3.4% y-o-y).
In Alberta, employment jumped by 37.7k in September, reversing the surprising drop seen in August. Despite the sharp job gains, the unemployment rate edged higher to 5.8% from 5.7%. This reflects a significant increase in the participation rate to 69.3% from 68.4%. The employment rate, the share of the population holding a job, rose to 65.3% from 64.55, but still below its August level .
The job gains in Alberta were mainly in the private sector (+37.6k) and in the public sector (+5.7k), while there were some small losses in self-employed (-5.6k). Both the goods-producing sector (+15.1k) and the service sector (+22.7k) saw higher employment.
The increase in the goods-producing industry was broad-based with gains in construction (+5.6k), manufacturing (+4.7k) and natural resource extraction (+3.0k).
The higher employment in the service sector was relatively broad-based, with 9 of the 11 subsectors showing a increase. The biggest job gains were in trade (+12.5k), finance, insurance and real estate (+3.8k), public administration (+3.6k) and food and accommodation services (+2.6k). Lower employment in professional, scientific and technical services (-3.7k) and health care (-2.8k) offset some of these gains.
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 lost 5.0k jobs each month on average. The declines were in Calgary (-6.5k), Edmonton (-1.4k), and Red Deer (-0.7k). There were some gains in Western Alberta (+5.2k), Lethbridge-Medicine Hat (+3.3k), and Wood-Buffalo-Cold Lake (+1.1k).
The unemployment rate for the province was slightly lower at 5.5% on average over the past three months. The unemployment rate either eased in all regions, except in Red Deer where it rose 0.7pp. The biggest declines were in Lethbridge-Medicine Hat (-1.1 pp), Western Alberta (1.0pp) and Calgary (-0.5pp)The unemployment rate is the highest in Red Deer (+7.4%), Wood Buffalo-Cold Lake (5.7%), and Edmonton (5.6%). It is the lowest in Camrose-Drumheller (3.3%), Lethbridge-Medicine Hat (4.9%), and Western Alberta (+5.1%.
The employment rate for Alberta eased to 65.0%. The employment rate eased the most in Calgary (-0.6pp), Red Deer (-0.5pp), and Edmonton (-0.3pp).It increased in Lethbridge-Medicine Hat (+1.2pp), Western Alberta (+1.0pp) and Wood Buffalo-Cold Lake (+0.7pp).
[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.
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Independent Opinion
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