Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Employment increased less than expected in October, but the unemployment rate remain unchanged. After a strong gain in September, the pace of job gains seems to have returned to its weak trend. Moreover, the details show that the stable unemployment rate is partly the result of a slower increase in the labour force, as workers stay on the sidelines, pushing the participation rate to 64.8%, its lowest since May 1997 if we exclude the pandemic. Similarly, the employment rate eased to 60.6%, its lowest since June 1999, if we exclude the pandemic.
The return to the lacklustre trend in job gains and the continued easing in the participation rate and employment rate suggest minimal improvement in the labour market. While the robust increase in hours worked would indicate better economic activity in October, it was likely the result of the rise in full-time employment.
Wage growth for permanent workers accelerated to 4.9%, higher than expectations. However, we estimate that the 3-month annualized change of the seasonally-adjusted series was 4.5%, suggesting most of the acceleration is due to a base effect rather than a reacceleration in wage growth in recent months.
Overall, the report shows that the labour market returned to its weak trend after some strength in September, with job gains remaining modest relative to population growth. Moreover, there continue to be signs of weakness, with participation and employment rates reaching their lowest levels since the late 1990s, and the unemployment rate remains elevated. We continue to believe that the BoC cut it policy rate by 50bp at the December meeting. However, whether the BoC will want to continue its accelerated path to neutral remains to be seen and may depend on the next CPI release.
Alberta saw a solid increase in employment in September of 13.2k, after a decline in September. With the higher employment, the unemployment rate eased to 7.3%. We also note that, with job growth higher than population growth in September, the employment rate edged higher but remains close to its lowest level on record, if we exclude the pandemic.
Over the past year, the province has created 58k jobs, and the momentum has been weak in recent months. Moreover, the unemployment rate in Alberta remains higher than the national measure, partly due to the strong population growth. Wage growth in Alberta accelerated to +4.9% y-o-y, in line with the rest of the country after a long period of underperformance (see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations). However, the momentum (3m/3m annualized change) suggests that most of the acceleration in wage growth is due to a base effect rather than stronger wage increases in recent months.
Employment increased by 14.5k in October, weaker than expectations. Despite the weak job gains, the unemployment rate was unchanged at 6.5% due to a decline in the participation rate to 64.8% from 64.9%, its lowest since May 1997 if we exclude the pandemic. The slower increase in the labour force doesn’t seem to be due to slower population growth, but to fewer people entering the labour force, likely due to some pessimism regarding their job prospects. The employment rate, the share of the population holding a job, eased to 60.6% from 60.7%, its lowest since June 1999, as the population grew faster than employment.
Wage growth for permanent workers accelerated to 4.9% from 4.5% y-o-y, stronger than expectations. The 3-month annualized change in seasonally-adjusted wages accelerated to 4.5%. Still, it remained below the y-o-y growth rate, suggesting that the acceleration in wage growth is mostly the result of a base effect rather than a reacceleration in wage growth in recent months.
The details show that most of the job gains were in full-time (+25.6k) while there were losses in part-time jobs (-11.2k). This explains somewhat the increase in hours worked (+0.3% m-o-m), but also suggests that economic activity was likely robust in October. The higher employment in October was in the private sector (+20.5k) and self-employed (+11.3k), while there were losses in the public sector (-17.2k). Over the past year, about 30% of job creation was in the public sector, lower than in previous months.
On an industrial level, the employment gains were mostly in the goods-producing (+13.5k), while jobs in the service sector were essentially flat (+0.9k).
The details in the good-producing sector show that the job gains were mainly in manufacturing (+9.7k), construction (+6.3k) and natural resources (+1.5k). Job losses in agriculture (-4.7k) offset some of the decline.
The increase in the service industries was led by building, business and other support services (+28.7k), accommodation and food services (+12.2k) and education (+11.6k). These gains were partly offset by losses in most other service industries led by finance, insurance and real estate (-13.0k), transport and warehousing (-9.3k), public administration (-8.7k), trade (-8.3k), and other services (-7.6k).
At a provincial level, employment was mixed. Most of the gains in employment were in Alberta (+13.2k, +0.5% m-o-m), BC (+8.3k, +0.3% m-o-m), Quebec (+6.5k, +0.1% m-o-m), and New Brunswick (+3.3k, +0.8% m-o-m). These gains were partly offset by losses in Ontario (-10.9k, -0.1% m-o-m), Nova Scotia (-2.1k, -0.4% m-o-m), PEI (-1.1k, -1.2% m-o-m), and Manitoba (-1.3k, -0.2% m-o-m).
The unemployment rate was also mixed across provinces but increased in PEI (+2.9pp), Saskatchewan (+0.3pp), Manitoba (+0.2pp), and Quebec (+0.2pp). It eased the most in Alberta (-0.2pp), BC (-0.2pp), Ontario (-0.1pp), and Nova Scotia (-0.1pp).
The unemployment rate is the highest in Newfoundland (+10.1%), PEI (+10.0%), Alberta (+7.3%), Ontario (+6.8%), and New Brunswick (+6.8%). It is the lowest in Quebec (5.7%), BC (+5.8%), Manitoba (5.9%), and Saskatchewan (6.0%).
Wages for permanent workers increased the most in Nova Scotia (+6.7% y-o-y), Ontario (+6.2% y-o-y), PEI (+5.9% y-o-y), and Alberta (+4.9% y-o-y). It rose at the slowest pace in Newfoundland (+1.2% y-o-y), Quebec (+2.6% y-o-y), Nova Scotia (+3.0% y-o-y), and Saskatchewan (+3.0% y-o-y).
In Alberta, employment increased by 13.2k and followed a decline of 7.6k in September. The unemployment rate eased to 7.3%, thanks to robust job gains and a slower increase in the labour force. As such, the participation rate was unchanged at 68.8%. The employment rate, the share of the population holding a job, increased to 63.7% from 63.6%. Wage growth for permanent workers jumped higher to 4.9% y-o-y. However, with the 3m/3m annualized wage increase remaining low at 1.0%, most of the acceleration seems to be due to a base effect.
The job gains in Alberta were both part-time (+5.0k) and full-time (+8.2k). The higher employment was mainly in the private sector (+22.1k), while there were some losses in the public sector (-3.5k) and self-employed (-5.4k).
The employment gains were all in the goods-producing sector (+13.6k), while the service sector saw a marginal decline (-0.4k).
The increase in the goods-producing industry was mainly in construction (+8.5k), manufacturing (+7.1k), and utilities (+1.1k), while the natural resources sector saw a decline (-3.3k).
The service sector saw losses in trade (-9.7k), public administration (-8.1k), and health care (-3.2k). These declines were partly offset by gains in information, culture and recreation (+6.6k), business, building and other support services (+6.0k), and education (+4.3k).
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 5.3k jobs each month on average. The increases were mainly in Edmonton (+8.2k), Calgary (+4.4k), and Camrose-Drumheller (+2.5k), while there were losses in Western Alberta (-6.0k) and Lethbridge-Medicine Hat (-4.7k).
The unemployment rate for the province eased to 7.2% on average over the past three months. The unemployment rate edged lower in most regions, led by Red Deer (-1.0pp), Edmonton (-0.7pp), Wood Buffalo-Cold Lake (-0.5pp), and Camrose-Drumheller (-0.4pp). The unemployment rate rose in Lethbridge-Medicine Hat (+0.7pp) and Calgary (+0.2pp).
The unemployment rate is the highest in Edmonton (+7.9%), Calgary (+7.4%), and Lethbridge-Medicine Hat (6.8%). It is the lowest in Camrose-Drumheller (4.3%), Western Alberta (4.9%), and Red Deer (6.6%).
The employment rate for Alberta eased to a level of 63.9% over the past three months as employment grows more slowly than population. The employment rate deteriorated the most in Lethbridge-Medicine Hat (-2.1pp), Western Alberta (-2.1pp), and Red Deer (-0.2pp). It improved in Camrose-Drumheller (+1.3pp), Edmonton (+0.4pp), and Wood Buffalo-Cold Lake (+0.4pp).
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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.