Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Employment increased more than expected in November, but the unemployment rate increased sharply, signalling an increase in the amount of slack in the labour market. The details show that the rise in the unemployment rate resulted from a strong increase in the labour force as workers entered the labour, pushing the participation rate to 65.1%. Moreover, while the rise in employment was robust in November, it is unclear how sustainable it will be. Furthermore, the decrease in hours worked, despite most of the gains being full-time, suggests that economic activity in November may hae been weak.
Wage growth for permanent workers decelerated sharply to 3.9%, well below expectations. Moreover, we estimate that the 3-month annualized change of the seasonally-adjusted series was 3.8%, suggesting most of the deceleration is due to weaker wages in recent months. As such, wages for permanent workers declined 0.6% m-o-m non-seasonally adjusted in November, its biggest decline since the pandemic.
Overall, the report points to an increase in the amount of slack in the labour market: higher unemployment rate, rise in participation rate, and sharp deceleration in wages.
Going into next week’s BoC meeting, we continue to believe that the central bank should cut by 50bp to bring the policy rate to neutral faster, especially given the downside risk to growth from slower population and US tariffs next year. Looking at the increased slack in the labour market, continued sluggish growth outlook, and inflation within the target, we think the BoC will choose to cut 50bp. However, our level of conviction is low. As stated in their summary of deliberations, some members of the MPC are concerned that a big cut could be interpreted as “panic” and may support a 25bp increase instead.
Alberta saw another solid increase in employment in October of +24.3k, responsible for almost half of the job gains at the national level. However, despite higher employment, the unemployment rate rose to 7.5% due to increased labour force. We also note that the employment rate edged higher with job growth higher than population growth in September.
Over the past year, the province has created 70k jobs, and the momentum has improved somewhat in recent months. However, the unemployment rate in Alberta remains higher than the national measure, partly due to the strong population growth. Wage growth in Alberta decelerated sharply to +2.4% y-o-y, weaker than in the rest of the country and returning to its long period of underperformance (see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations). Moreover, the momentum (3m/3m annualized change) suggests that wage growth has declined in recent months. As such, the average wage level in the province seems to have peaked during the summer.
Employment increased by 50.5k in November, stronger than expectations. Despite the strong job gains, the unemployment rate rose to 6.8%, its highest since the pandemic, due to an increase in the participation rate to 65.1% from 64.8%. The increase in the labour force was stronger than population growth, suggesting more people entered the labour force. Nevertheless, despite the robust job gains, the employment rate, the share of the population holding a job, was unchanged at 60.6%, its lowest since June 1999.
Wage growth for permanent workers decelerated sharply to 3.9% from 4.9% y-o-y, weaker than expectations. The 3-month annualized change in seasonally-adjusted wages dropped sharply to a meagre 0.3%. Looking at the details, wages for permanent workers declined 0.6% m-o-m non-seasonally adjusted in November, its biggest decline since the pandemic. Job composition could explain some of the monthly variations, given the job losses in November in sectors with above-average wages and gains in sectors with below-average wages.
The details show that most of the job gains were in full-time (+54.2k) while there were marginal losses in part-time jobs (-3.6k). Despite the increase in full-time employment, hours worked declined in November (-0.2% m-o-m), suggesting that economic activity was likely weak on the month. The higher employment in November was in the public sector (+45.0k), while there were some modest gains in the private sector (+6.3k) and a marginal losse in self-employed (-0.7k). Over the past year, almost 40% of job creation was in the public sector.
On an industrial level, the employment gains were mostly in the service sector (+71.5k), while jobs in the goods-producing sector declined (-20.8k).
The details in the good-producing sector show that the job losses were mainly in manufacturing (-28.5k), natural resources (-6.3k) and agriculture (-3.4k). Job gains in construction (+18.4k) offset some of the decline. We note that employment in the sector is almost 50k compared to the same month last year, mostly due to lower employment in manufacturing and agriculture.
The increase in the service industries was led by trade (+38.7k), professional, scientific and technical (+17.4k), education (+15.4k), and accommodation and food services (+15.3k). These gains were partly offset by losses in transport and warehousing (-18.5k), business, building and other support services (-5.4k), and other services (-4.7k).
At a provincial level, employment was mixed. Most of the gains in employment were in Alberta (+24.3k, +1.0% m-o-m), Quebec (+22.2k, +0.5% m-o-m), Manitoba (+6.6k, +0.9% m-o-m), PEI (+2.7k, +2.9% m-o-m). These gains were partly offset by losses in Ontario (-5.7k, -0.1% m-o-m), Newfoundland (-1.9k, -0.8% m-o-m), and New Brunswick (-1.0k, -0.2% m-o-m).
The unemployment rate was also mixed across provinces but increased the most in Ontario (+0.8pp), Newfoundland (+0.7pp), Alberta (+0.2pp), and Quebec (+0.2pp). It eased the most in PEI (-2.0pp), Saskatchewan (-0.4pp), Manitoba (-0.1pp), Nova Scotia (-0.1pp), and BC (-0.1pp).
The unemployment rate is the highest in Newfoundland (+10.8%), PEI (+8.0%), Ontario (+7.6%), Alberta (+7.5%), and New Brunswick (+6.9%). It is the lowest in Saskatchewan (5.6%), BC (+5.7%), Manitoba (5.8%), and Quebec (5.9%).
Wages for permanent workers increased the most in Newfoundland (+5.9% y-o-y), Ontario (+5.5% y-o-y), Nova Scotia (+5.2% y-o-y), and New Brunswick (+4.3% y-o-y). It rose at the slowest pace in BC (+0.9% y-o-y), PEI (+1.6% y-o-y), Saskatchewan (+2.4% y-o-y), and Alberta (+2.4% y-o-y).
In Alberta, employment rose by 24.3k and followed 13.2k increase in October. Despite the strong job gains, the unemployment rate edge higher to 7.5%, mainly due to a strong increase in the labour force. As such, the participation rate jumped 69.3%. from 68.8% The employment rate, the share of the population holding a job, increased to 64.1% from 63.7%. Wage growth for permanent workers eased sharply to 2.4% y-o-y. Moreover, the 3m/3m annualized wage dropped and declined by 3.7%, the second month of negative momentum, suggesting very weak wage growth in recent months. The data shows that average wages for permanent workers peaked during the summer and have stagnated since.
The job gains in Alberta were mainly full-time (+28.5k), while there was a loss in part-time (-4.2k). The higher employment was mainly in the self-employed (+18.0k) and the public sectors (+8.8k), while there were some losses in the private sector (-2.6k).
The employment gains were all in the service sector (+32.2k), while the goods-producing sector saw a loss (-8.0k).
The decrease in the goods-producing industry was mainly in natural resources (-9.3k), and construction (-0.8k), while agriculture (+1.2k) and the manufacturing sector (+1.1k) saw gains.
The service sector saw broad-based increases, led by trade (+12.3k), finance, insurance and real estate (+4.4k), transport and warehousing (+3.4k), and information, culture and recreation (+2.8k). The only decline was in education (-2.4k).
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 11.0k jobs each month on average. The increases were mainly in Edmonton (+11.9k), and Camrose-Drumheller (+2.0k), while there were losses in Western Alberta (-4.4k), Calgary (-1.9k) and Red Deer (-1.4k).
The unemployment rate for the province eased to 3.8% on average over the past three months. The unemployment rate edged lower in most regions, led by Western Alberta (-0.9pp), Wood Buffalo-Cold Lake (-0.9pp), Lethbridge-Medicine Hat (-0.6pp), and Edmonton (-0.5pp). The unemployment rate rose in Red Deer (+0.3pp).
The unemployment rate is the highest in Edmonton (+7.4%), Calgary (+7.3%), and Red Deer (6.9%). It is the lowest in Western Alberta (4.0%), Camrose-Drumheller (4.3%), and Wood Buffalo-Cold Lake (5.8%).
The employment rate for Alberta was unchanged at 63.9% over the past three months. The employment rate deteriorated the most in Western Alberta (-1.6pp), Red Deer (-0.9pp), and Wood Buffalo-Cold Lake (-0.9pp). It improved in Camrose-Drumheller (+1.0pp), and Edmonton (+0.5pp).
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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.