Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud. This report includes regional details for Alberta.
Today’s Labour Force Survey data showed employment declined for a second consecutive month. However, the details show that, while the number of employed declined, there was also another sharp drop in the labour force. This exodus from the labour force explains the record unemployment rate. If it were not for the drop in the participation rate over the past two months, the unemployment rate in Canada would be 5.7% in July. The decline in the labour force leads to further tightening of the labour market and exacerbates the current labour shortage.
We believe the recent employment decline is unlikely to sway the Bank of Canada. Instead, the continued tightening of the labour market and high inflation support the need for aggressive rate hikes by the Bank of Canada. Accordingly, we expect the BoC to increase its policy rate by 50bp at the September and October meetings, ending the year at 3.50%.
Alberta saw a marginal gain in employment in June. The unemployment rate declined further to 4.7% and is at its lowest since January 2015. However, this continues to be partly the result of workers leaving the labour market, as shown by the participation rate remaining below its pre-pandemic level. As such, if the participation was the same as before the pandemic, the unemployment rate in the province would be much higher at 6.9%. However, the employment rate is above its pre-COVID level, an improvement for the province’s labour market and showing a greater proportion of the population is currently employed. We expect the labour market in the province to continue to outperform the rest of the country in the coming months, with t continued record value of oil production providing a tailwind to the province’s economy.
Employment fell by 30.6k in July, the second consecutive decline in employment. Despite the drop in employment, the unemployment rate remained unchanged at 4.9%, the lowest level since records started in 1976. This was the result of a decline in the participation rate to 64.7% from 64.9%. The participation is 0.9 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 6.0%. The employment rate, the share of the population holding a job, edged lower to 61.6% from 61.7%, slightly below its pre-COVID level.
The details show that the job losses in July were in part-time (-17.5k) and full-time jobs (-13k). In addition, the decrease in employment was in the public sector (-50k) and private sector jobs (-14k), while there were some robust gains in self-employment (+34k).
On an industrial level, the decrease in employment was mostly in the service sector (-53k), while there was a solid gain in the goods-producing sector (+23k).
The details in the good-producing sector show that the higher employment was broad-based, led by construction (+8k), manufacturing (+7k), agriculture (+7k) and natural resources (+4k).
The decline in the service industry was mixed, with losses in trade (-27k), health care (-22k), education (-18k), information, culture and recreation (-14k), and business, building and other support (-12k). These decreases were partly offset by increases in finance, real estate and insurance (+11k) and and transport and warehousing (+9k).
Despite the overall level of employment being above its pre-COVID level, only 11 out of 16 industries have a level of employment above their pre-pandemic level. The lagging sectors are: agriculture, transport and warehousing, business, building and other support services, accommodation and food services, and other services. Employment in the agriculture sector and accommodation and food services are still about 15% below its pre-COVID-19 level, the worst-performing industry.
In Alberta, employment was barely changed, increasing by a meager 0.3k in July. The unemployment rate edged lower to 4.8%, the lowest since January 2015, and was entirely to a further decline in the participation rate to 68.8% from 69.0 %. The participation rate in the province is 1.6 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 6.9%. The employment rate, the share of the population holding a job, inched lower to 65.5% from 65.6%, remaining above its pre-pandemic level.
The job gains in Alberta was mainly in the service sector (+3k), while there was a modest loss in the goods-producing sector (-3k). The decline in the goods-producing industry was in manufacturing (-4k).
The job performance in the service sector was mixed. A decline in business, building and other support services (-6k) and finance, insurance and real estate (-3k) was partly offset by gains in trade (+3k), public administration (+3k), accommodation and food services (+2k), and professional, scientific and technical (+2k).
Despite overall employment being above its pre-COVID level, only 9 out of 16 industries have a level of employment above their pre-pandemic level. Those industries are: natural resources, construction, trade, transport and warehousing, finance, insurance and real estate, professional, technical and scientific, education, health care, and public administration. Employment in the accommodation and food services sector, the worst-hit industry, remains about 15% below its pre-COVID-19 level. Employment in the manufacturing sector is 19% below its pre-covid level, significantly underperforming the rest of the country.
On a regional basis, the data is published on a three-month average basis (see table below). Over the past three months, the province gained 12.4k jobs, with most of the gains in Calgary (+12.1k). Employment also rose in Edmonton (+7.3k). The were some job losses in Red Deer (-2.4k), Western Alberta (-1.7k), Lethbridge-Medicine Hat (-1.5k), Camrose-Drumheller (-1.3k) and Wood Buffalo-Cold Lake (-0.9k).
Compared to the pre-pandemic levels, Camrose-Drumheller (-5.8%) and Red Deer (-3.6%) have employment below their pre-pandemic level. Conversely, Calgary (+11.3%), Edmonton (+8.0%), Western Alberta (+1.9%), and Lethbridge-Medicine Hat (+0.7%), and Wood Buffalo-Cold Lake (+0.4%) all have employment above their pre-pandemic level.
The unemployment rate for the province declined to 5.1 % from 5.4%. The decrease in the unemployment rate was seen in most regions, except for Western Alberta (+0.9pp) and Camrose-Drumheller (+0.8pp). The biggest drops were in Red Deer (-1.5pp), Lethbridge-Medicine Hat (-1.2pp) and Edmonton (-0.5pp). The unemployment rate is the highest in Red Deer (5.4%), Western Alberta (5.4%), and Wood Buffalo-Cold Lake (5.4%). It is the lowest in Lethbridge-Medicine Hat (3.8%), Camrose-Drumheller (4.9%), and Calgary (5.1%).
The employment rate for Alberta improved to 66.7% from 66.3%. It improved in Calgary (+0.7pp), and Edmonton (+0.5pp), while it deteriorated in the rest of the province led by Red Deer (-1.4pp), Wood Buffalo-Cold Lake (-0.9pp), Lethbridge-Medicine Hat (-0.8pp) and Red Deer (-0.7pp). Compared to pre-pandemic, the employment is still well below in Red Deer (-3.8pp) and Camrose-Drumheller (-3.7pp). All the numbers are expressed as three-month average of the non-seasonally adjusted number.
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