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 shows that job gains were remained strong, with the unemployment rate reaching a new record low of 5.1%. These are the signs the economy remains robust and that labour market conditions improved further.
The continued tightening of the labour market and high inflation support the need for aggressive rate hikes by the Bank of Canada. Accordingly, we expect the BoC to increase its policy rate by 50bp at the July and September meetings and end the year at 2.75%.
Alberta saw strong gain in employment in May. The unemployment rate declined further and is at its lowest since early 2015. However, this continues to be partly the result of workers having yet to return to the labour market, as shown by the participation rate remaining below its pre-pandemic level. However, we note that the employment rate is now its pre-COVID level, a positive improvement for province labour market We expect the labour market in the province to continue to improve. The continued record value of oil production should broadly support the economy and the labour market.
Employment increased by 38.9k in May, slightly better than expected. As a result, the level of employment is further above its pre-pandemic level (+2.6%). As a result of the rise in employment and an unchanged participation rate, the unemployment rate edged lower to 5.1% from 5.2%, the lowest level since records started in 1976. Nevertheless, the underutilization rate, which includes those working less than 50% of their usual hours and those not in the labour force but who wanted to work, declined but remains above its pre-pandemic level at 11.7% (11.4% in February 2020). The participation rate was unchanged at 65.3%. The employment rate, the share of the population holding a job, was unchanged 61.9%, at its pre-COVID level.
The details show that the job gains in May were in mainly in full-time (+135k), while there was a decline in part-time jobs (-96k). In addition, almost all of the increase in employment was in the public sector (+108k) with some gains in self-employed (+26k), while there were some job losses in the private sector (-95k).
On an industrial level, the increase in employment was mostly in the service sector (+81k), while there was a loss in the goods-producing sector (-41k).
The details in the good-producing sector show that the losses were mostly in manufacturing (-41k), agriculture (-4k), and construction (-3k). Those declines were partly offset by gains in natural resources (+8k).
The increase in the service industry was mixed, with gains in trade (+38k), education (+24k), professional, scientific and technical sector (+20.5k),
public administration (+16.5k), professional, scientific and technical (+15k), information, culture and recreation (+13k), and education (+12.5k)and accommodation and food services (+20k). Those increases were partly offset by declines in transport and warehousing (-25k) and finance, insurance and real estate (-18.5k).
Despite continued gains and the overall level of employment being above its pre-COVID level, only 10 out of 16 industries have a level of employment above their pre-pandemic level. The lagging sectors are: agriculture, manufacturing, transport and warehousing, business, building and other support services, accommodation and food services, and other services. With further gains in May, accommodation and food services is no longer the worst-performing industry since the pandemic (14% below its pre-pandemic level). Employment in the agriculture sector is currently almost 20% below its pre-COVID-19 level, the worst-performing industry.
In Alberta, employment increased by 27.6k in May. The level of employment is 4.1% (or 92k) above its pre-COVID level. The unemployment rate dropped to 5.3%, the lowest since January 2015. The participation rate edged higher to 69.3% from 69.2%. However, the participation rate in the province remains 1.1 percentage points (pp) below its pre-pandemic level suggesting many workers are remaining on the sidelines. The employment rate, the share of the population holding a job, rose to 65.7% and is now above its pre-pandemic level.
The job gains in Alberta was mainly in the service sector (+21k), while there were some more modest gains in the goods-producing sector (6k). The increase in the goods-producing industry were in utilities (+4k), natural ressources (+3k), and agriculture (+3k), while there was a loss in manufacturing (-3k).
The job performance in the service sector was mixed. Most of the job gains were in professional, scientific and technical (+11k), transport and warehousing (+8k), trade (+5.5k), other services (+4k), and accommodation and food services (+4k). These increases were partly offset by losses in health care (-7.5k), and information, culture and recreation (-5k).
Despite continued job gains and overall employment being above its pre-COVID level, only 9 out of 16 industries have a level of employment above their pre-pandemic level. Those industries are: natural resources, construction, trade, transport and warehousing, finance, insurance and real estate, professional, technical and scientific, business, building and support services, education, and health care. Employment in the accommodation and food services sector, the worst-hit industry, remains almost 15% below its pre-COVID-19 level, underperforming slightly the rest of the country. Employment in the manufacturing sector is 17% below its pre-covid level, the worst performing sector.
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 34.6k jobs, with most of the gains in Edmonton (+19.9) and Calgary (+12.7k). Employment also rose marginally in Western Alberta (+2.7k), Camrose-Drumheller (+1.4k), Wood Buffalo-Cold Lake (+0.3k), and Lethbridge-Medicine Hat (+0.1k), but decline slightly in Red Deer (-0.5k).
Compared to the pre-pandemic levels, only Camrose-Drumheller (-10.0%) has employment below its pre-pandemic level. Conversely, Calgary (+8.4%), Edmonton (+5.6%), Lethbridge-Medicine Hat (+4.1%), Western Alberta (+2.2%), and Wood Buffalo-Cold Lake (+1.8%) all have employment above their pre-pandemic level.
The unemployment rate for the province as a whole declined to 5.5% from 6.4%. The decrease in the unemployment rate was broad-based, with the biggest drops in Edmonton (-1.1pp), Camrose-Drumheller (-0.8pp), Calgaru (-0.7pp), and Western Alberta (-0.7pp). The unemployment rate is the highest in Calgary (6.2%), Red Deer (6.2%) and Edmonton (5.8%). It is the lowest in Western Alberta (3.5%), Lethbridge-Medicine Hat (4.6%), and Camrose-Drumheller (4.6%).
The employment rate for Alberta improved to 65.8% from 65.1%. It improved in Edmonton (+1.4pp), Camrose-Drumheller (+0.9pp), Western Alberta (+0.9pp) and Calgaru (+0.7pp), while in deteriorated in Red Deer (-0.3pp).
[1] All the numbers are expressed as three-month average of the non-seasonally adjusted number.
Independent Opinion
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