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 robust labour market in Canada. However, job creation remains below population growth. While this would normally suggest an increase in the amount of slack in the economy, a lower participation rate, employment rate and unemployment rate indicate that it may not be the case in January.

The report also showed that wage growth for permanent workers eased to 5.3%. Moreover, we estimate that the 3-month annualized change of the seasonally-adjusted series eased to 3.6%. Nevertheless, wage growth and its momentum for various wage measures remain elevated.

The Bank of Canada will welcome the slower pace of wage growth, even though it continues to grow at levels that are disconnected from productivity gains. Moreover, there are signs that the slack built up in the labour market over the past year is helping to ease some of the wage pressures.

Recent comments suggest that the Bank of Canada believes rates are restrictive enough and that its focus is now on how long to kept them elevated. In our view, the attention is turning to 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 late spring, while a resilient labour market reduces the likelihood of an early rate cut. We believe that June will likely be the time for the first cut.

Whether the country experiences a soft or hard landing in 2024 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 another increase in employment in January of 10.1k. The unemployment rate also eased as some workers moved or remained on the sidelines.

Over the past twelve months, the Alberta labour market has been robust, with job gains of about 85k. However, the unemployment rate in Alberta remains higher than the national measure, partly due to the strong population growth. Moreover, wage growth in Alberta (+4.5% y-o-y)  continued underperforming against the rest of the country (see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations).

Employment rose by 37.3k in January, stronger than expectations. Thanks to the solid gain in employment and a decline in the participation rate to 65.3% from 65.5%, the unemployment rate eased to 5.7%. The employment rate, the share of the population holding a job, edged lower to 61.6% from 61.7%, as a result of strong population growth than employment growth.

Wage growth for permanent workers eased to 5.3% from 5.7% y-o-y. However, the 3-month annualized change in wages eased to 3.6%, suggesting that wage growth continues to decelerate after some months of strong increases. Nevertheless, wage growth across a broad spectrum of measures remains elevated.

The details show that gains in part-time jobs (+48.9k) in January more than fully reversed the losses in full-time jobs (-11.6k). Moreover, the higher employment was mostly in the public sector (+47.6k), while gains in the private sector (+7.4k) were the modest and self-employed declined (-17.7k).

On an industrial level, the employment gains were all in the service sector (+60.4k), while jobs in the goods-producing sector declined (-23.0k).

The details in the good-producing sector show that the job losses were broad-based, led by construction (-6.6k), manufacturing (+6.2k), and agriculture (-5.8k).

There were solid gains in many of the service industries led by trade (+31.3k), finance, insurance and real estate (+28.1k), education (+27.7k), and transport and warehousing (+19.9k). Losses in accommodation and food services (-30.3k), professional, scientific and technical services (-16.5k), health care (+13.4k), and information, culture and recreation (-12.8k) partly offset the gains.

At a provincial level, the job gains were mainly seen in Ontario (+23.8k, +0.3 m-o-m), Alberta (10.1k, +0.4% m-o-m), Newfoundland (+7.5k, 3.2% m-o-m), and Manitoba (+6.9k, 1.0% m-o-m). There were losses in Quebec (-7.5k, -0.2% m-o-m), Saskatchewan (-6.2k, -1.0% m-o-m), and BC (-2.6k, -0.1%).

Most provinces saw the unemployment rate ease in January, with the biggest decreases in PEI (-0.7pp), Newfoundland (-0.3pp), Alberta (-0.3pp), Manitoba (-0.2pp), and Quebec (-0.3pp). The unemployment rate rose in Nova Scotia (+1.1pp), and New Brunswick (+0.3pp).

The unemployment rate is the highest in Newfoundland (+10.2%), PEI (7.4%), New Scotia (+7.0%), and New Brunswick (+6.6%). It is the lowest in Manitoba (4.0%), Quebec (4.5%), Saskatchewan (4.7%), and BC (+5.4%).

Wages increase the most in New Brunswick (+7.5% y-o-y), BC (+6.7% y-o-y), Ontario (+6.3% y-o-y), and Nova Scotia (+6.0% y-o-y). It increased at the slowest pace in PEI (+1.8% y-o-y), Saskatchewan (+2.7% y-o-y), Quebec (+3.6% y-o-y), Manitoba (+4.0% y-o-y), and Alberta (4.5% y-o-y).

In Alberta, employment increased 10.1k in January. Thanks to the job gains and the participation rate easing to 69.6% from 69.7%, the unemployment rate edged lower to 6.2% from 6.3. The employment rate, the share of the population holding a job, eased to 65.2%.

The job gains in Alberta were in the public sector (+11.3k) and self-employed (+8.3k), while there were some losses in the private sector (-9.4k). All the gains were in the service sector (+23.7k), while the goods-producing sector saw lower employment (-13.6k).

The decrease in the goods-producing industry was broad-based, led by construction (-7.7k), natural resources (-3.6k) and agriculture (-2.2k). The only sector with higher employment was utilities (+1.7k).

The higher employment in the service sector was broad-based, with losses in only 3 of the 11 subsectors: professional, technical and scientific (-5.4k), trade (-2.5k), and business, building and support services (-1.4k). The job gains were mainly transport and warehousing (+10.0k), finance, insurance and real estate (+6.0k).

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 14.7k jobs each month on average. The increases were mainly in Calgary (+17.2k) with some modest gains in Red Deer (+2.9k) and Camrose-Drumheller (+1.6k). There were losses in Edmonton (-2.3k) and Lethbridge-Medicine Hat (-1.7k).

The unemployment rate for the province rose to 6.2% on average over the past three months and the unemployment rate increased in all regions. The biggest increases were in Lethbridge-Medicine Hat (+1.9pp), Camrose-Drumheller (+1.0pp), and Edmonton (+0.6pp). The unemployment rate is the highest in Red Deer (8.2%), Lethbridge-Medicine Hat (7.4%), and Edmonton (+6.9%). It is the lowest in Camrose-Drumheller (4.1%), Western Alberta (+4.7%), and Wood Buffalo-Cold Lake (4.8%).

The employment rate for Alberta edged higher to 65.0%. The employment rate improved the most in Red Deer (+1.5pp), Calgary (+0.9pp), and Camrose-Drumheller (+0.8pp). It decreased in Lethbridge-Medicine Hat (-0.9pp), Edmonton (-0.6pp) and Wood Buffalo-Cold Lake (-0.4pp).

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


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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.