Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud
Bottom line
Today’s Labour Force Survey data shows a marked improvement in the labour market in November. Although employment is now above its pre-pandemic level, it has fallen to 6%, a level consistent with the start of previous tightening cycles by the Bank of Canada. With the recovery expected to continue, further improvement in the labour market is expected, reducing the amount of slack further.
With this in mind, we now believe the Bank of Canada will start its hiking cycle at the April 2022 meeting, raising its policy rate by 0.25%. As mentioned previously, the timing of the first rate hike in 2022 depends on the pace of reduction in the slack in the labour market. The Omicron variant of COVID could force some delay in the timing if it leads to the re-imposition of restriction on economic activity.
Alberta saw a rebound in employment after a setback in October, likely due to a more acute fourth wave of COVID infections. We expect the labour market in the province to continue to improve. As such, the record value of oil production in recent months and an expected increase in investment in the sector should support the labour market.
Employment rose by 153.7k in November as the economy continued to recover. The level of employment is currently 1.0% above where it was at the onset of the pandemic. As a result of the increase in employment, the unemployment rate dropped to 6.0% from 6.7%. This is the lowest level since the start of the pandemic, but still 0.3 percentage points higher than in February 2020. The participation rate remained unchanged at 65.3%, slightly below the level it was before the pandemic. The employment rate, the share of the population holding a job, edged higher to 61.4%, the highest since the start of the pandemic but still 0.4 percentage points (pp) below its pre-pandemic level. This suggests there is still some recovery to get the labour market back to where it should have been in the absence of the pandemic.
The details show that the job gains in November were robust in both full-time (+79.9k) and part-time (+73.8k). In addition, the job creation was concentrated in the private sector (+106.9k), while the gains in self-employed (+29.0k) and the public sector (17.8k) were also robust.
On an industrial level, the increase in employment was mostly in the service sector (+127.2k), while employment in the good-producing sector increased (+26.4k).
The robust in the good-producing sector comes after months of anemic employment growth in the sector in recent months. The details show that strong gains in manufacturing (35k) were partly offset by small losses in natural resources (-3k), utilities (-4k) and agriculture (-3k).
The rise in the service industry were fairly broad-based with strong gains in health care (+44k), trade (+28), professional, scientific and technical (+28k), and transport and warehousing (+18k). Those gains were partly offset by losses in other services (-16k) and education (13k).
Despite the strong gains in overall employment and that the overall level of employment is back above its pre-COVID level, only 9 out of 16 industries have a level of employment above their pre-pandemic level. These sectors are natural resources, manufacturing, trade, finance, insurance and real estate, professional, scientific and technical services, education, health care, information, culture and recreation, and public administration. Nevertheless, some sectors continue to lag behind the rest of the economy. However, with restrictions being eased significantly, the accommodation and food services is no longer the worst performing industry since the start of the pandemic (17% below its pre-pandemic level). Employment in the agriculture sector is currently almost 20% below its pre-COVID-19 level.
In Alberta, employment increased 15.4k in October. The level of employment is 0.4% (or 10k) above its pre-pandemic level. Despite the job gains, the unemployment rate remained unchanged at 7.6%, only marginally above where it was at the onset of the pandemic. The stable unemployment rate resulted from a rise in the participation rate to 69.2% from 68.9%, still 1 percentage point below its pre-pandemic level, as workers come back to the labour force. The employment rate, the share of the population holding a job, edged higher to 64.0%, its highest since the start of the pandemic but still 1 percentage point below its February 2020 level.
Similar to the rest of the country, Alberta saw most of its job gains in the service sector (+13k), while the increase in the goods-producing sector (3k) was more modest. The increase in goods-producing industries was mainly in construction (+6k), while there were some small losses in manufacturing (-2k) and natural resources (-2k).
The job performance in the service sector was mixed. There were gains in other services (+8k), trade (+7k), health care (+4), and transport and warehousing (+3k). These gains were offset by losses in education (-5.5k) and public administration (-2k)
Despite the job gains in September and overall employment being close to its pre-COVID level, only 8 out of 16 industries have a level of employment above their pre-pandemic level. Those industries are: natural resources, 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 34% below its pre-COVID-19 level, under performing the rest of the country.
On a regional basis[1], since the data is published on a three-month average basis, the numbers capture most of the impact of the fourth wave (see table below). Over the past three months, the province gained 3.4k jobs, with increases in all regions, except in Calgary (-5k) and Lethbridge-Medicine Hat (-1.8k). Employment rose the most in Edmonton (+4.3k) and Red Deer (+3.3k).
Compared to the pre-pandemic levels, employment is the lowest in Camrose-Drumheller (-11.7%), Wood Buffalo-Cold Lake (-5.1%), Lethbridge-Medicine Hat (-4.5%), and Western Alberta (-3.9%). Edmonton (+2.0%), Calgary (+1.4%) and Red Deer (+0.4%) are the only regions where employment is above their pre-pandemic level.
The unemployment rate for the province as a whole rose to 8.2% from 8.0%. However, there were increases in Lethbridge-Medicine Hat (+0.6pp), Wood Buffalo-Cold Lake (+0.5pp), and Calgary (+0.4pp). On the flip side, the unemployment rate decreased in Camrose-Drumheller (-0.5pp), and Red Deer (-0.3pp). The unemployment rate is the highest in Camrose-Drumheller (9.7%), Calgary (8.4%), and Edmonton (8.3%). It is the lowest in Lethbridge-Medicine Hat (6.2%) and Wood Buffalo-Cold Lake (7.0%).
The employment rate only improved in Red Deer, Wood Buffalo-Cold Lake and Edmonton but deteriorated elsewhere, led by Lethbridge-Medicine Hat, Camrose-Drumheller and Calgary.
[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.Independent Opinion
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