Economic insight 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. 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 continues to remain robust, with average wages increasing by 5.2% 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 to job losses. With this in mind, some weakening of the labour market would be a welcomed outcome for the BoC.
The continued resilience of the labour market is likely to tilt the BoC in favour of tightening monetary policy by 25bp at the January 25th meeting. However, whether the BoC hikes further will likely depend on inflation, with the next release on January 17th. Nevertheless, it may require some strong signs of moderation in underlying inflationary pressures for the BoC to keep rates unchanged.
Alberta saw a strong gain in employment in December, reversing the losses seen the prior month. The unemployment rate was unchanged at 5.8%, as more workers joined the labour force. The strength in December comes after some months of underperformance relative to the rest of the country. Nevertheless, we continue to note that the unemployment rate in Alberta remains higher than the national measure and that we observe some notable underperformance in wage growth in Alberta at 1.7% y-o-y, compared to 5.2% y-o-y in the rest of Canada.
Employment jumped higher by 104.0k in December, much higher than expectations. The unemployment rate remained eased to 5.0% from 5.1% as a result of the increase in employment, while the participation rate increased to 65.0% from 64.8%. The participation is 0.6 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 5.8%. The employment rate, the share of the population holding a job, increased to 61.8% from 61.5%, close to its pre-COVID level. Wage growth decelerated slightly to 5.2% y-o-y from 5.4% y-o-y, but remained above 5%.
The details show that the job gains in December were mostly full-time (+84.5k) with a solid gain in part-time too (+19.5k)). In addition, the rise in employment was mainly in the private sector (+111.5k) and self-employed (+11k), while there was a loss in public sector jobs (-18k).
On an industrial level, the increase in employment was mainly in both the service sector (+82k) and the goods-producing sector (+22k).
The details in the good-producing sector show that most of the job gains were almost entirely in construction (+35k. On the other hand, there were losses in manufacturing (-8k), utilities (-4k) and natural resources (-2k).
The increase in the service industry was relatively broad-based with strong gains in transport and warehousing (+29k), information, culture and recreation (+25k) and professional, scientific and technical (+23k). These gains were partly offset by losses in health care (-17k), education (-10k) and trade (-9k).
Despite the overall level of employment being above its pre-COVID level by 3.3 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 more than 10% below its pre-COVID-19 level.
In Alberta, employment increased by 24.5k in December, reversing the loss seen in the previous month. Despite the gains in employment, the unemployment rate remained unchanged at 5.8%, its highest level since April 2022. The stable unemployment rate resulted from an increase in the participation rate to 69.16% from 68.6%. The participation rate in the province is still 1.3 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 7.5%. The employment rate, the share of the population holding a job, increased to 65.2%, marginally above its pre-pandemic level.
The job gains in Alberta were concentrated in the service sector (+22.2k), with some modest gains in the goods-producing sector (+2.4k). The increase in the goods-producing industry was mostly in construction (+12.5k), while those gains were partly offset by losses in natural resources (-7k), and utilities (-4k).
The higher employment in the service sector was relatively broad-based, with strong gains in transport and warehousing (+8k), health care (+5k), information, culture and recreation (+4.5k), professional, scientific and technical (+4k), and business, building and other support (+4k). These increases were partly offset by losses in trade (-6k), other services (-3k), and finance, insurance and real estate (-2k).
With the overall employment being above its pre-COVID level by 5.1pp, 12 out of 16 industries have a level of employment above its pre-pandemic level. The lagging industries are: agriculture, utilities, manufacturing, business, and accommodation and food 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, significantly 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 4.4k jobs. Most of the gains were in Lethbridge-Medicine Hat (+5.3k), Red Deer (+2.5k), Camrose-Drumheller (+1.9k), and Wood Buffalo-Cold Lake (+1.9k). Employment declined in Calgary (-10.6k) and Edmonton (-1.8k).
Compared to the pre-pandemic levels, most regions have employment above the pre-covid levels, led by Red Deer (+7.6%), Calgary (+6.3%), Camrose-Drumheller (+4.6%), and Edmonton (+3.1%). In comparison, employment in Lethbridge-Medicine Hat (-1%) and Wood Buffalo-Cold Lake (-0.3%) are still slightly below their pre-covid level.
The unemployment rate for the province inched higher to 5.1%, but the regional performance was mixed. The unemployment rate declined in most regions, led by Camrose-Drumheller (-0.7pp), Western Alberta (-0.4pp) and Lethbridge (-0.1pp). The unemployment rate rose in Calgary (+0.3pp), Red Deer (+0.2pp), and Wood Buffalo-Cold Lake (+0.2pp).
The unemployment rate is the highest in Red Deer (+6.4%), Calgary (+5.7%) and Western Alberta (5.2%). It is the lowest in Lethbridge-Medicine Hat (2.8%), Camrose-Drumheller (3.2%), and Wood Buffalo-Cold Lake (4.7%).
The employment rate for Alberta was unchanged at 64.3%. The employment rate rose the most in Lethbridge-Medicine Hat (+2.1pp), Wood Buffalo-Cold Lake (+1.8pp), Red Deer (+1.3pp), and Camrose-Drumheller (+1.0pp). It decreased in Calgary (-0.9pp) and Edmonton (-0.4pp).
[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.
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