Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud
Today’s Labour Force Survey data shows that restrictions to contain the spread of the Omicron took a toll on the labour market in January. However, with provinces already removing some restrictions, this setback is likely to be temporary and the recovery in the labour market should restart in February.
The job losses and rise in the unemployment rate were expected by Bank of Canada and do not change its view of the economy, as laid out in its Monetary Policy Report. As a result, we continue to expect the central bank to start its hiking cycle at the March 2nd meeting, increasing its policy rate by 25 basis points, and rising again at the April and June meeting to bring the policy rate to 1.00% by mid-year.
Alberta saw another gain in employment in January despite the rise in COVID-19 cases. The unemployment rate declined further and is below its pre-pandemic level. However, this is partly the result of workers leaving the labour market, as shown by the decline in the participation rate and the employment rate remaining below their pre-pandemic level. We expect the labour market in the province to continue to improve. The continued record value of oil production in recent months should broadly support the economy and the labour market.
Employment dropped by 200.1k in January as restrictions were put in place in many provinces to slow the spread of the Omicron variant. This was the first decline in employment since May 2021. Despite the significant job losses, the level of employment remains slightly above (+0.2%). As a result of the decline in employment, the unemployment rate rose to 6.5% from 6.0%. This is the first rise in the unemployment rate since April 2021, reaching a level 0.8 percentage points higher than in February 2020. The participation rate declined 65.0% from 65.4%, as workers stayed on the sideline rather than looking for work. The employment rate, the share of the population holding a job, dropped to 60.8%, 1.1 percentage points (pp) below its pre-pandemic level.
The details show that the job losses in January were in full-time (-83k) and part-time jobs (-117k). In addition, almost all of the decline in employment was in the private sector (-206k), while job losses in the public sector were more modest (-7.5k) and there were some gains in self-employed (+13k).
On an industrial level, the decrease in employment was in the service sector (-223k), while it increased in the goods-producing sector (+23k).
The robust gains in the good-producing sector are the third in a row and come after months of anemic employment growth in the sector. The details show that the gains were mostly in construction (+22k) followed by natural resources (+6k) and utilities (+5k), while there were losses in manufacturing (-10k).
The drop in the service industry was broad-based and due to the reintroduction of restrictions on economic activity, with declines in every sub sector, except for health care (+10k). The biggest decreases were in accommodation and food services (-113k), information, culture and recreation (-48k), business, building and support services (-22k), and trade (-18k).
Despite the overall level of employment being above its pre-COVID level, only nine out of 16 industries have a level of employment above their pre-pandemic level. These sectors are natural resources, utilities, manufacturing, trade, finance, insurance and real estate, professional, scientific and technical services, education, health care and public administration. Nevertheless, some sectors continue to lag behind the rest of the economy. With restrictions reintroduced, accommodation and food services are the worst-performing industry since the pandemic (26% below its pre-pandemic level). Employment in the agriculture sector is currently almost 20% below its pre-COVID-19 level.
In Alberta, employment increased by 7.0k in January. The level of employment is 1.2% (or 26k) above its pre-pandemic level. With the job gains, the unemployment rate declined 7.2% from 7.5%, below where it was at the onset of the pandemic. The decline in the unemployment rate was partly the result of the participation rate edging lower to 69.3% from 69.2%, still almost one percentage point below its pre-pandemic level. The employment rate, the share of the population holding a job, remained unchanged at 64.5%, its highest since the start of the pandemic but still almost one percentage point below its February 2020 level.
The job gains in Alberta were in the goods-producing sector (+18k), while there was a decline in the service sector (-11k). In the goods-producing sector, the increase was broad-based, with robust gains in manufacturing (10.5k) and natural resources (+3k).
The job performance in the service sector was mixed. Most of the job losses were in accommodation and food services (-11k), education (-6k), professional, technical and scientific services (-5.5k) and public administration (-4k). However, these declines were partly offset by gains in information, culture and recreation (+7k) and health care (+6k).
Despite continued job gains and overall employment being above its pre-COVID level, only nine 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 almost 30% below its pre-COVID-19 level, slightly under performing the rest of the country.
On a regional basis, since the data is published on a three-month average basis (see table below). Over the past three months, the province gained 7.7k jobs, increasing in most regions, except in Calgary (-2.0k) and Lethbridge-Medicine Hat (-1.7k). Employment rose the most in Western Alberta (+6.4k), Camrose-Drumheller (+2.6k), and Edmonton (+2.6k).
Compared to the pre-pandemic levels, employment is the lowest in Camrose-Drumheller (-10.0%), Lethbridge-Medicine Hat (-7.6%), and Wood Buffalo-Cold Lake (-2.4%). Conversely, Edmonton (+2.7%), Red Deer (+1.3%), Calgary (+1.1%), and Western Alberta (+0.6%) are the regions where employment is above their pre-pandemic level.
The unemployment rate for the province as a whole declined to 7.8% from 8.0%. However, there were increases in Lethbridge-Medicine Hat (+0.5pp), Red Deer (+0.3pp), Calgary (+0.2pp) and Wood Buffalo-Cold Lake (+0.2pp). On the flip side, the unemployment rate decreased in Camrose-Drumheller (-2.9pp) and Western Alberta (-1.3pp). The unemployment rate is the highest in Calgary (8.9%), Red Deer (8.5%), and Wood Buffalo-Cold Lake (8.1%). It is the lowest in Western Alberta (6.1%), Camrose-Drumheller (6.8%), Lethbridge-Medicine Hat (7.3%), and Edmonton (7.3%).
The employment rate for Alberta improved to 63.4% from 63.2%. It improved in Western Alberta (+2.3pp), Camrose-Drumheller (+1.6pp), and Wood Buffalo-Cold Lake (0.9pp) but deteriorated in Lethbridge-Medicine Hat (-0.8pp) and Calgary (-0.2pp). All the numbers are expressed as three-month average of the non-seasonally adjusted number.
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