Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Employment eased unexpectedly in July and for a second consecutive month. However, despite the decline in employment, the unemployment rate remained unchanged, as the participation rate declined to its lowest level since 1998, if we exclude the pandemic. It is becoming clearer that the labour market is weak.
While the strong increase in full-time jobs is positive by pushing hours worked higher, most of the job creation is, once again, in the public sector. This suggests that economic activity remains weak in the private sector. In addition, the details show the labour market deteriorated more for the younger cohorts.
Despite the slack in the labour market, wage growth for permanent workers remained elevated at 5.2%, higher than expectations. Moreover, we estimate that the 3-month annualized change of the seasonally-adjusted series was 7.0%, suggesting stronger wage increases in recent months. The acceleration in wage growth will attract the attention of the BoC.
Overall, the report shows that the labour market is weak and supports our view that the BoC will continue to cut its policy rate at the September meeting. Beyond September, it is very likely the central bank will cut at every meeting in 2024 (i.e. October and December), ending the year at 3.75%. The strong wage growth is likely to raise some eyebrows at the BoC, but, as mentioned in their latest communication, their focus is shifting to the downside risks to economic activity rather than inflation.
Alberta saw a modest loss in employment in July of 0.6k, after 8.1k in June. Nevertheless, employment has declined in the province over the past three months (-4.3k). Despite lower employment, a decline in the participation rate left the unemployment rate unchanged at 7.1%. We also noted that the employment rate, at 64.0%, is at its lowest since 1984, excluding the pandemic.
Over the past year, the province has created 54k jobs and the momentum in recent months has been lacklustre. Moreover, the unemployment rate in Alberta remains higher than the national measure, in part due to the strong population growth. Wage growth in Alberta accelerated +5.9% y-o-y and outperformed the rest of the country for the first time in months (see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations).
Employment eased by 2.8k in July, weaker than expectations and the second consecutive decline. Despite lower employment levels, the unemployment rate was unchanged at 6.4% due to a decline in the labour force. The participation rate eased to 65.0% from 65.3%, its lowest level since June 1998, if we exclude the pandemic. The employment rate, the share of the population holding a job, eased to 60.9% from 61.1%, its lowest since November 1999, as the population grew faster than employment.
Wage growth for permanent workers decelerated to 5.2% from 5.6% y-o-y, but remained higher than expectations. The 3-month annualized change in seasonally-adjusted wages accelerated to 7.0%, suggesting stronger wage pressures in recent months are pushing wage growth higher. Moreover, wage growth across a broad spectrum of measures remains elevated and accelerated.
The details show that sizeable job losses in part-time (-64.4k) were partly offset by strong gains in full-time jobs (+61.6k). This explains the robust increase in hours worked (+1.0% m-o-m). However, the lower employment was mostly in the private sector (-41.9k) and, to a lesser extent, self-employed (-1.6k), while strong gains in the public sector (+40.8k) partly offset these losses.
On an industrial level, the employment losses were all in the service sector (-14.8k) for the second month in a row, while jobs in the goods-producing sector saw a gain (+12.1k).
The details in the good-producing sector show that the job gains were mainly in all sectors, except manufacturing (-8.6k). Most of the job gains were in construction (+7.0k), utilities (+6.2k), and natural resources (+5.0k).
The losses in the service industries were led by the trade sector (-44.1k), finance, insurance and real estate (-15.0k), and accommodation and food services (-9.7k). These losses were partly offset by gains in public administration (+20.0k), transport and warehousing (+14.5k), and professional, technical and scientific (+12.2k). It is important to note that employment in retail and wholesale trade has declined by 127k over the past 12 months, suggesting some weakness in this sector.
At a provincial level, employment was mixed. There losses in employment were in BC (-10.3k, -0.4% m-o-m), Quebec (-9.1k, -0.2% m-o-m), Manitoba (-5.4k, -0.8% m-o-m), and Nova Scotia (-4.8k, -0.9% m-o-m). The only provinces showing gains were Ontario (+22.4k, +0.3% m-o-m) and Saskatchewan (+6.7k, +1.1% m-o-m).
Despite no change at the national level, most provinces saw a rise in the unemployment rate, except for New Brunswick (-0.5pp), Ontario (-0.1pp) and Saskatchewan (-0.1pp). The unemployment rate increased the most in PEI (+0.9pp), Manitoba (+0.6pp), Newfoundland (+0.4pp), and Nova Scotia (+0.4pp).
The unemployment rate is the highest in Newfoundland (+9.6%), PEI (8.9%), New Brunswick (7.2%), and Alberta (+7.1%). It is the lowest in Saskatchewan (5.4%), BC (5.5%), Manitoba (5.7%), and Manitoba (5.7%)
Wages for permanent workers increased the most in PEI (8.6% y-o-y), New Brunswick (+7.9% y-o-y), Nova Scotia (+7.7% y-o-y) and Quebec (+6.0% y-o-y). It rose at the slowest pace in Manitoba (+2.5% y-o-y), Saskatchewan (+3.4% y-o-y), Newfoundland (+3.4% y-o-y), and Ontario (4.8% y-o-y).
In Alberta, employment decreased by 0.6k, while the unemployment rate remained unchanged at 7.1%. The participation rate declined to 68.9% from 69.3%. The employment rate, the share of the population holding a job, also eased to 64.0%, its lowest since June 1984 if we exclude the pandemic. Wage growth for permanent workers increased to 5.9% y-o-y, and outperformed the rest of the country.
The job gains in Alberta were mainly full-time (+46.4k), while part-time declined (-47.0k). There was higher employment in both the public (+4.7k) and private sector (+1.4k), while there was a loss in self-employed (-6.8k). There was higher employment in the goods-producing sector (+4.5k), while the service sector saw a loss (-5.1k).
The increase in the goods-producing industry was mainly in natural resources (+4.9k) and construction (+4.5k), while there were some losses in manufacturing (-2.8k) and agriculture (-1.6k).
The service sector saw losses in accommodation and food services (-10.1k), other services (-9.0k), professional, technical and scientific (-5.6k), and transport and warehousing (-4.0k). These declines were partly offset by increases in education (+11.7k), health care (+8.5k), information, culture and recreation (+5.1k), and trade (+4.7k).
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 6.0k jobs each month on average. The decreases were mainly in Calgary (-7.6k), and Edmonton (-5.4k), while there were gains in Western Alberta (+1.1k).
The unemployment rate for the province was unchanged at 7.1% on average over the past three months. The unemployment rate edged higher in Edmonton (+0.8pp), Wood Buffalo-Cold Lake (+0.6pp), Red Deer (+0.5pp) and Camrose-Drumheller (+0.3pp), while there was some easing in Calgary (-0.8pp), Western Alberta (-0.7pp) and Lethbrige-Medicine Hat (-0.1pp).
The unemployment rate is the highest in Edmonton (+7.9%), Red Deer (+7.8%), and Calgary (+7.3%). It is the lowest in Camrose-Drumheller (4.6%), Western Alberta (4.6%), Lethbridge-Medicine Hat (5.2%) and Wood Buffalo-Cold Lake (6.1%).
The employment rate for Alberta declined to a level of 64.3% over the past three months as employment grows more slowly than population. The employment rate deteriorated mainly in Calgary (-0.9pp), Edmonton (-0.7pp), Lethbridge-Medicine Hat (-0.5pp) and Camrose-Drumheller (-0.3pp). It improved only in Western Alberta (+2.0pp) and Wood Buffalo-Cold Lake (+0.1pp).
[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.
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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.