Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Employment increased 8.8k in May, better than expected. However, the unemployment rate edged higher to 7.0%, its highest since 2016, if we exclude the pandemic. The details shows that the trade war with the US is taking a toll on employment with a fourth consecutive decline in the manufacturing sector, for a total of about 55k job losses. There was also a sizeable decline in public administration (-32k) as workers hired for the federal election are being laid off.
Wage growth for permanent workers was unchanged at 3.5%, we estimate that the 3-month annualized change of the seasonally-adjusted series was 3.6%, suggesting an acceleration in wages in May.
Overall, the labour market has not deteriorated as expected and is showing some signs of resilience but it far from strong. Slack in the labour market continues to increase, as evidenced by the gradual rise in the unemployment rate. Moreover, we note that the employment rate for core-aged men (25-54 years old) is at its lowest since 1998, if we exclude the pandemic. The overall employment rate is also close to its lowest level since the last 1990s. Similarly, younger cohorts, especially returning students, are facing very high unemployment rates.
The report shows that the US tariffs continued to have an impact on Canada’s labour market, with a fourth consecutive decline in manufacturing employment. While there are signs of resilience in the rest of the economy, job gains in other sectors remain subdued. The question for the Canadian economic outlook is whether we will see further deterioration in the labout market, leading to sizeable job losses. As the BoC pointed to in the Financial System Review, and something we have been saying the same since Fall 2023(see Will it be a hard landing or a soft landing? The labour market will decide), severe job losses could lead to a much deeper economic contraction because of its impact on heavily indebted households.
The resilience of the labour market in May is likely to provide some confidence to the BoC that it took the right decision to pause at the June meeting and to wait for more information. Moreover, the BoC made it clear this week that inflation is their primary focus currently. Unless underlying inflationary pressures ease, it would require a significant deterioration of the economy for them to cut rates. With this in mind, the next CPI report on June 24th holds the answer to whether the BoC will cut in July.
Alberta saw a 1.7k job losses in May. Since the beginning of the year, employment has decline four out of five months, for a total of 8.8k job losses. As a result, the unemployment rate has continued to drift higher, reaching 7.4 in May, above the national measure.
Wage growth in Alberta decelerated to 1.3% y-o-y from 1.6% y-o-y and underperformed significantly the rest of the country and the 3-month annualized change of the seasonally-adjusted series was -3.1%, suggesting a drop in average wages in recent months. Wages in Alberta have generally underperformed relative to the rest of the country in recent years (see Where’s the boom? And the rise and fall of the Alberta Advantage for some explanations).
Employment increased by 8.8k in May, marginally higher than expected. Despite the increase in employment, the unemployment rate rose to 7.0% because the labour force increased faster than the employment. The increase in the unemployment rate was somewhat amplified by the decrease in employment in the public and self-employed sector. The participation rate remained steady at 65.3%. The employment rate, the share of the population holding a job, persisted at 60.8%. Both the participation rate and the employment rate remain close to their lowest levels since the late 1990s.
Wage growth for permanent workers remained at 3.5% y-o-y. The 3-month annualized change in seasonally-adjusted wages grew to 3.6% from 1.9%, suggesting weaker wage pressures in recent months.
The details show that the job gains were in full-time jobs (+57.7k) while there was a loss in part-time (-48.8k). The lower employment in May was mostly in the public sector (-21.3k), while the private sector (+60.6k), self-employed (-30.4k) employment decreased. Over the past year, about 25% of job creation was in the public sector. Hours worked remained eased in May (+0.0% m-o-m), suggesting that economic activity declined this month.
On an industrial level, there were job losses in the goods-producing sector (-13.0k) and gain in the service sector (+21.8k)
The details in the goods-producing sector show that the job losses were mainly in manufacturing (-12.2k), and construction (-7.4k) , and natural resources (-2.5k). They were partly offset by increases in utilities (4.9k) and agriculture (4.3k).
The increase in the service industries (+21.8k) was led by trade (+42.8k), information, culture and recreation (+19.3k), finance, insurance real estate and leasing (+12.4k), and transport, and professional, scientific & tech (+9.9k). These increases were partly offset by decreases in public administration (-32.2k), accommodation and food services (-16.4k), and transport and warehousing (-15.5k).
At a provincial level, the increase in employment was concentrated in BC (+13.0k, +0.4% m-o-m), Nova Scotia (+10.6k, +2.1% m-o-m), Ontario (+3.4k, +0.0% m-o-m), and Saskatchewan (+1.1k, +0.2% m-o-m). There were some job losses in three provinces, led by Quebec (-17.0k, -0.4% m-o-m), Manitoba (-5.8k, -0.8% m-o-m), and PEI (-2.7k, -2.9% m-o-m).
The unemployment rate grew slightly at the national level but saw some slight increases in some provinces, led by PEI (+1.6pp), Manitoba (+0.6pp), Alberta (+0.3pp), BC (+0.2pp). Nova Scotia (-0.7pp), New Brunswick (-0.6pp), Quebec (-0.2pp), and Saskatchewan (-0.1pp) saw a decline in the unemployment rate.
The unemployment rate is the highest in Newfoundland (+9.7%), PEI (+8.2%), Ontario (+7.9%), Alberta (+7.4%) and Nova Scotia (+6.5%). It is the lowest in Saskatchewan (+4.2%), and Manitoba (+5.9%).
Wages for permanent workers remain constant nationwide. It increased most in Ontario (+5.0% y-o-y), Manitoba (+4.6% y-o-y), Nova scotia (+4.3% y-o-y), and Newfoundland (+4.1% y-o-y). It rose at the slowest pace in Alberta (+1.3% y-o-y), and PEI (+2.0% y-o-y).
Looking at CMAs, Employment grew the most over the past year in Kamloops (+27.4% y-o-y), Red Deer (+13.7% y-o-y), St. Catherines-Niagara (+8.5% y-o-y). However, the lowest-performing cities were Saint John (-7.5% y-o-y), Guelph (-7.5% y-o-y), and Nanaimo (-7.1% y-o-y).
The unemployment rate was the highest in Peterborough (+11.2%), Windsor (+10.8%), Oshawa (+9.1%). While the lowest rates are in Victoria (+3.7%), Belleville (+4.1%), Thunder Bay (+4.4%) and Sherbrooke (+4.5%)
In Alberta, employment decreased by 1.7k in May. As a result of continues increased in the labour force and the decline in employment, the unemployment rate rose to 7.4% from 7.1%, while the participation rate was unchanged at 68.5%. The employment rate, the share of the population holding a job, eased to 63.4% from 63.6%. Wage growth for permanent workers slowed to 1.3% y-o-y. The 3m/3m annualized wage growth remained negative 3.1%, suggesting a strong decline in average wages for permanent workers in recent months.
The job losses in Alberta were mainly full-time (-1.7k), while part-time jobs were mostly unchanged (-0.1k). Employment was higher mainly in the private sector (+12.2k), while there were marginal losses in the public sector (-12.2k) and in self-employed (-3.2k).
The employment gains were mainly in the goods-producing sector (+11.0k) and offset by a decline in the service sector (-12.6k)
The increase in the goods-producing industry was mainly in agriculture (+6.9k), natural resources extraction (+2.9k), manufacturing (+1.1k) and utilities (+1.0k). There was a small decline in construction (-0.9k).
The service sector losses were relatively broad-based, led by transportation and warehousing (-6.9k), finance, insurance and real estate (-5.1k), public administration (-4.5k), and other services (-4.3k). These declines were partly offset by gains in information, culture and recreation (+6.5k) and professional, scientific and technical (+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 lost 1.4k jobs each month on average. The decreases were broad-based, led by Edmonton (-3.2k), Western Alberta (-2.9k), Camrose-Drumheller (-1.2k), and Lethbridge-Medicine Hat. On the flip side, employment rose in Red Deer (+6.1k) and Wood Buffalo-Cold Lake (+1.0k).
The unemployment rate for the province rose to 7.2% on average over the past three months. The unemployment rate increased in all regions, except in Red Deer (-0.9pp). The biggest increases were in Western Alberta (+1.2pp), Lethbridge-Medicine Hat (+0.5pp), Calgary (+0.4pp), and Wood Buffalo-Cold Lake (+0.3pp).
The unemployment rate is the highest in Calgary (7.6%), Western Alberta (7.1%), Edmonton (7.1%), and Lethbridge-Medicine Hat (7.1%). It is the lowest in Camrose-Drumheller (5.7%), Red Deer (5.9%) and Wood Buffalo-Cold Lake (6.5%).
The employment rate for Alberta eased to 63.5% over the past three months. The employment rate only improved in Red Deer (+3.0pp) and Wood Buffalo-Cold Lake (+0.8pp). It decreased the most in Western Alberta (-1.0pp), Camrose-Drumheller (-0.7pp). and Lethbridge-Medicine Hat (-0.5pp).
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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.