Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Employment surged by 60.4k in September, significantly stronger than expected, mostly reversing the decline seen in August. However, despite strong job gains, the unemployment rate remained unchanged at 7.1%, its highest level since May 2016, excluding the pandemic, as the participation rate rose slightly. Similarly, the employment rate improved to 60.9% but remains close to its lowest level since the late 1990s. We also note that the youth unemployment rate reached its highest level since 2010 at 14.7%.
The details indicate that the increase in employment was primarily due to job gains in the manufacturing sectors (+28k). However, this was not enough to reverse the job losses seen so far this year, with employment in the sector still about 25k lower than at the beginning of the year.
We note that despite the strong employment gains, mainly led by full-time jobs, total hours worked in the economy declined by 0.2% m-o-m in September. This suggests very weak economic activity on the month, unless productivity improved significantly.
Despite the slack in the labour market, wage growth for permanent workers was unchanged 3.6%. Moreover, we estimate that the 3-month annualized change of the seasonally-adjusted series reached 7.2%, suggesting that wage growth was elevated in recent months. Continued high wages could be a concern for the Bank of Canada in the current context, where inflation appears to be sticky.
Overall, today’s data shows that the labour market in Canada may have started to stabilize. However, one month of data does not create a trend, as the strong gains in June this year have shown (it was followed by two consecutive months of decline). While the stabilization in the labour market will provide some comfort to the Bank of Canada, there is still significant slack in the labour market. Moreover, with few signs that economic activity is expected to remain tepid in the coming months, we expect the labour market to remain weak.
Nevertheless, the rebound in employment reduces the likelihood that the BoC will cut at the October meeting. However, the lack of strong rebound in activity and of reduction in the amount of slack in the economy in the coming months means that we continue to believe the BoC will cut its policy rate again this year, especially as its measures of core inflation are expected to ease further in the coming months.
Alberta also saw a surge in employment with a gain of 42.5k jobs in September, more than reversing the job losses seen in July and August. As a result, the unemployment rate dropped to 7.8% from 8.4%.
The strength in the labour market in August reverses some strangeness in the data, where the Alberta labour market had underperformed somewhat the rest of the country since the beginning of the year, despite having an economy that is much less impacted by the US tariffs than the rest of the country, since most of its exports qualify for the CUSMA-exemption.
Wage growth in Alberta accelerated to 3.6% y-o-y from 2.6% y-o-y and is growing at the same pace as the rest of the country, after a lengthy period of underperformance. However, the 3-month annualized change of the seasonally-adjusted series, at -2.0%, suggests that average wages may have dropped in recent months. Wages in Alberta have generally underperformed relative to the rest of the country in recent years (see Why are Albertans so grumpy? It’s about falling behind economically for some explanations).
Employment surged by 60.4k in September, partly reversing the decline seen in August. However, despite the strong job gains, the unemployment rate remained unchanged at 7.1%, its highest since 2016 excluding the pandemic, as the participation rate inched higher to 65.2% from 65.1%. The employment rate, the share of the population holding a job, also rose to 60.6% from 60.5%. Despite the improvement in September, both the participation rate and the employment rate remain close to their lowest levels since the late 1990s.
Wage growth for permanent workers was unchanged at 3.6% y-o-y in September. However, the 3-month annualized change in seasonally-adjusted wages shows that wages rose from 5.9% to 7.3%, suggesting stronger wage pressures in recent months.
The details show that the job gains were in full-time jobs (+106.1k) while part-time jobs declined (-45.6k). The higher employment in September was broad-based, led by the public sector (30.7k), private sector (+21.9k), and self-employment (+7.9k). Over the past year, about 45% of job creation was in the public sector.
Hours worked decreased in September (-0.2% m-o-m), despite the strong job gains led by full-time employment, suggesting that economic activity was tepid on the month.
On an industrial level, there were job gains in the goods-producing sector (+42.0k) and the service sector (+18.4k).
The details in the goods-producing sector show that the job gains were mainly in manufacturing (+27.8k), agriculture (+13.2k), natural resources (+7.1k), and utilities (+2.0k). These increases were partly offset by a decline in construction (-8.2k).
The increase in the service sector was led by health care (+13.9k), other services (+12.1k), professional, scientific and technical (+9.4k), and finance, insurance and real estate (+8.5k). These gains were partly offset by losses in trade (-20.8k), transport and warehousing (-7.4k), and information, culture and recreation (-5.8k).
At a provincial level, the increase in employment was led by Alberta (+42.5k, +1.7% m-o-m), Ontario (+8.8k, +0.1% m-o-m), BC (+7.8k, +0.3% m-o-m), and New Brunswick (+4.7k, +1.2%). On the flip side, there were losses in Quebec (-4.7k, -0.1% m-o-m), Newfoundland (-2.2k, -0.9k), PEI (-0.9k, -1.0% m-o-m), and Saskatchewan (-0.7k, -0.1% m-o-m).
The unemployment rate was unchanged at the national level but saw some decreases in Alberta (-0.6pp), Quebec (-0.3pp), and Nova Scotia (-0.3pp). On the flip side, the unemployment rate rose the most in PEI (+1.6pp), Saskatchewan (+1.3pp), Manitoba (+0.5pp), and New Brunswick (+0.4pp). Compared to last year, the unemployment rate has increased by 0.5pp nationally, and it has increased in all provinces, except in Nova Scotia.
The unemployment rate is the highest in Newfoundland (+10.6%), PEI (9.7%), New Brunswick (8.1%) and Ontario (7.9%). It is the lowest in Quebec (5.7%), Saskatchewan (+6.0%), Nova Scotia (6.2%) and Manitoba (+6.2%).
Wages for permanent workers increased 3.6% y-o-y nationwide. It increased most in Nova Scotia (+5.2% y-o-y), Manitoba (+4.8% y-o-y), New Brunswick (+4.6% y-o-y), and Quebec (+4.3% y-o-y). It rose at the slowest pace in PEI (+1.4% y-o-y), Saskatchewan (+2.5% y-o-y), Newfoundland (+2.6% y-o-y), and Ontario (+3.11% y-o-y).
Looking at CMAs, Employment grew the most over the past year in Drummondville (+30.2% y-o-y), Kelowna (+13.8% y-o-y), Kamloops (+12.5% y-o-y), Peterborough (+9.8% y-o-y), and Brandford (+8.9% y-o-y). On the flip side, employment has declines the most in Windsor (-3.9% y-o-y), Barrie (-3.7% y-o-y), Guelph (-3.2% y-o-y), Saint John (-2.8% y-o-y), and Abbotsford-Mission (-2.8% y-o-y).
The unemployment rate was the highest in Windsor (10.4%), Brandford (9.7%), Kamloops (9.5%), and Toronto (8.9%). The lowest rates are in Saguenay (4.2%), Quebec (4.8%), Victoria (4.8%), and Thunder Bay (4.9%).
In Alberta, employment increased by 42.5k in September, the biggest monthly gain since the pandemic and more than reversing the declines seen in June and July. As a result, the unemployment rate dropped to 7.8% from 8.4%. The participation rate rose to 69.3% from 68.8%. The employment rate, the share of the population holding a job, jumped to 63.9% from 63.0%. Wage growth for permanent workers accelerated to 3.6% y-o-y. However, the 3m/3m annualized wage growth showed a 2.0% decline, suggesting lower wages in September.
The job gains in Alberta were mainly part-time (+23.5k), while full-time jobs increased (+18.8k). Employment was higher mainly in the private sector (+24.8k), followed by self-employed (+9.8k) and the public sector (+7.8k). Over the past year, about 54% of job gains in the province were in the public sector.
Employment increased in both the goods-producing sectors (+25.7k), and the service sector (+16.7k).
The increase in the goods-producing industry was broad-based, led by construction (+8.4k), manufacturing (+7.9k), agriculture (+4.5k), and natural resources (+4.2k).
The job gains in the service sector were mainly in education (+7.4k), trade (+7.3k), public administration (+6.6k), and professional, scientific and technical (+6.5k). These were partly offset by declines in transport and warehousing (-8.1k), information, culture and recreation (-7.1k), accommodation and food services (-3.4k), and finance, insurance and real estate (-3.3k).
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 3.4k jobs each month on average. The increases were in Western Alberta (+5.3k), Lethbridge-Medicine Hat (+2.7k), and Camrose-Drumheller (+1.5k). Employment declined in Calgary (-3.3k), Edmonton (-3.1k), and Red Deer (-1.4k).
The unemployment rate for the province rose to 8.1% on average over the past three months. The unemployment rate increased in all regions, except in Western Alberta (-0.4pp). It increased the most in Red Deer (+1.8pp), Lethbridge-Medicine Hat (+1.5pp) and Calgary (+0.5pp)
The unemployment rate is the highest in Lethbridge-Medicine Hat (8.9%), Edmonton (8.6%), and Calgary (8.1%). It is the lowest in, Camrose-Drumheller (5.4%), Wood Buffalo-Cold Lake (6.3%), and Western Alberta (6.6%).
The employment rate for Alberta was unchanged at 63.6% over the past three months. The employment rate improved in Western Alberta (+1.8pp), Lethbridge-Medicine Hat (+1.1pp) and Camrose-Drumheller (+0.9pp). It decreased the most in Red Deer (-0.6pp), Calgary (-0.4pp), and Edmonton (-0.3pp).
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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.