Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud. This report includes regional details for Alberta.

Bottom line

Today’s Labour Force Survey data points to a very gradual softening in Canada’s labour market, with job gains remaining below labour force growth, nudging the unemployment rate to 5.8%. Moreover, a decline in hours worked suggests that economic activity was weak in November.

The report also showed that wage growth remained unchanged at 5.0% y-o-y. However, we estimate that the 3-month annualized change of the seasonally-adjusted series eased to 4.3%. Nevertheless, wage growth and its momentum for various wage measures remain elevated.

The Bank of Canada will take comfort in seeing slower momentum in wage gains, but wages continue to grow at levels that are disconnected from productivity gains. The rise in the unemployment rate suggests that some slack is gradually building up in the labour market, which should help ease some of the upside pressures on wages.

With some progress made in recent months to create some slack in the labour market and slower wage growth, further rate hikes look very unlikely. Our view remains that the policy rate has peaked and that the Bank of Canada will stay on the sideline and watch previous rate increases work their way through the economic system and reduce inflationary pressures.

As we have shown previously (see What happened to the recession? The role of the policy stance and demographic), monetary policy entered restrictive territory in late 2022. Historical patterns suggest a downturn usually follows 5 to 7 quarters later, suggesting very weak growth late this year and early next year. With inflation expected to ease accordingly, this suggests that some easing in mid-2024 is likely.

Whether the country experiences a soft or hard landing depends heavily on the health of the evolution of the labour market ie whether we see a hiring freeze or broad-based layoffs as the economic activity slows further (see Will it be a hard landing or a soft landing? The labour market will decide).

Alberta saw a robust increase in employment in November of 8.9k. Nevertheless, the unemployment rate rose slightly as the gains were weaker than the gains in working-age population. However, the gains in employment were concentrated in construction, while most sectors saw only marginal gains and losses.

Over the past twelve months, the Alberta labour market has been robust, looking at job gains. However, the unemployment rate in Alberta remains higher than the national measure, partly due to the strong population growth. Interestingly, wage growth in Alberta (+5.5% y-o-y) outperformed the rest of the country, something seldom seen since the pandemic(see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations).

Employment rose by 24.9k in November, stronger than the consensus. With the gain in employment weaker than the increase in working-age population, the unemployment rate drifted higher to 5.8% from 5.7%, while the participation rate was unchanged at 65.6%. The employment rate, the share of the population holding a job, edged lower to 61.8%.

Wage growth for permanent workers remained unchanged at 5.0% y-o-y. The 3-month annualized change in wages also decreased to 4.3%, suggesting that wage growth continues to decelerate after some months of strong increases. Nevertheless, wage growth across a broad spectrum of measures remains elevated.

The details show that the gains in November were mostly full-time jobs (+59.6k), while there were some losses in part-time (-34.7k) jobs. In addition, the higher employment was mostly in the private sector (+37.7k) and public sector (+11.7k), while there was a decline in self-employed (-24.5k).

On an industrial level, the employment gains were all in the goods-producing sector (+38.3k), while jobs in the service sector declined (-13.4k).

The details in the good-producing sector show that the job gains were mainly in manufacturing (+28.4k), offsetting the loss seen in October and in construction (+27.0k). This was partly offset by small job losses in natural resources extraction (-4.5k), and agriculture (-3.6k).

The losses in the service industry were concentrated in trade (-26.9k) and finance, insurance and real estate (-18.4k). Gains in health care (+12.4k), transport and warehousing (+8.6k), business, building and support services (+6.3k), and information, culture and recreation (+5.2k) partly offset the losses.

At a provincial level, the job gains were mainly seen in BC (+9.0k, +0.3 m-o-m), Alberta (+8.9k, +0.4% m-o-m), Ontario (+6.5k, 2.6% m-o-m), and New Brunswick (+2.4k, +0.6% m-o-m). There were losses in Quebec (-1.5k, -0.0 m-o-m), PEI (-1.3k, -1.4% m-o-m), Newfoundland (-0.9k, -0.4% m-o-m), and Nova Scotia (-0.7k, -0.1% m-o-m).

The unemployment rate rose in most provinces, led by PEI (+1.9pp), Saskatchewan (+0.7pp), Quebec (+0.2pp), and Nova Scotia (+0.2pp). It declined in four provinces: Manitoba (-0.3pp), New Brunswick (-0.2pp), Ontario (-01pp) and BC (-0.1pp).

The unemployment rate is the highest in Newfoundland (+10.0%), PEI (8.1%), Nova Scotia (6.8%), and New Brunswick (+6.4%). It is the lowest in Manitoba (4.9%), Saskatchewan (5.1%), Quebec (5.2%), and BC (+5.3%).

Wages increase the most in BC (+6.9% y-o-y), Nova Scotia (+6.6% y-o-y), Ontario (+5.6% y-o-y), and Alberta (+5.5% y-o-y). It increased at the slowest pace in Newfoundland (+1.8% y-o-y), PEI (+1.8% y-o-y), Manitoba (+2.3% y-o-y), and Saskatchewan (+3.2% y-o-y).

In Alberta, employment increased 8.9k in October. Despite the job gains, the unemployment rate edged higher to 5.9% from 5.8%. This reflects an increase in the participation rate to 69.4% from 69.3%. The employment rate, the share of the population holding a job, was unchanged at 65.3%.

The job gains in Alberta were mainly in both the private sector (+8.1k) and the public sector (+5.9k), while there were some minor losses in self-employed (-5.0k). All the gains were in the goods-producing sector (+18.0k), while the service sector (-9.2k) saw lower employment.

The increase in the goods-producing industry was mainly in construction (+15.7k), with some minor gains in natural resources and utilities. There were some small losses in manufacturing (-1.2k) and agriculture (-1.0k).

The lower employment in the service sector was relatively broad-based, with 7 of the 11 subsectors showing a decrease. The biggest job losses were in trade (-7.1k), accommodation and food services (-4.4k), finance, insurance and real estate (-3.2k), and education (-3.0k). Higher employment in public administration+5.9k), information, culture and recreation (+2.8k), health care (+2.8k) offset some of these gains.

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 lost 3.1k jobs each month on average. The decline is mostly the result of the big job losses seen in September. The declines were mainly in Calgary (-10.5k), Red Deer (-1.9k), and Edmonton (–1.4k). There were some gains in Lethbridge-Medicine Hat (+3.8k), Western Alberta (+2.1k), and Wood-Buffalo-Cold Lake (+0.9k).

The unemployment rate for the province was slightly lower at 5.3% on average over the past three months. The unemployment rate eased in most regions except Red Deer (+0.5pp) and Edmonton (+0.2p)p). The biggest declines were in Camrose-Drumheller (-0.8pp), Western Alberta (-0.7pp), Buffalo-Cold Lake (-0.7pp), and Lethbridge-Medicine Hat (-0.6 pp). The unemployment rate is the highest in Red Deer (7.9%), Edmonton (5.8%), and Calgary (+5.4%). It is the lowest in Camrose-Drumheller (2.5%), Lethbridge-Medicine Hat (4.3%), and Western Alberta (+4.4%).

The employment rate for Alberta eased to 64.6%. The employment rate eased the most in Red Deer (-1.2pp), Calgary (-1.0pp), and Edmonton (-0.4pp). It increased the most in Lethbridge-Medicine Hat (+1.3pp), Wood Buffalo-Cold Lake (+1.0pp), and Western Alebrta (+0.5pp).

[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.

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