Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud. This report includes regional details for Alberta.
Today’s Labour Force Survey data suggest the labour market in Canada remains robust and resilient. The low unemployment rate continues to signal that the labour market remains very tight, something the Bank of Canada is closely monitoring. Moreover, the report also shows that wage growth rebounded, with average wages increasing by 5.4% y-o-y, on par with its fastest pace in the current cycle.
A robust labour market and strong wage growth are a challenge for the Bank of Canada. As we have explained on numerous occasions, the BoC needs to slow growth and create some excess capacity in the economy to fight inflation. This will likely lead to a rise in the unemployment rate and job losses. With this in mind, continued strength and tightness in the labour market may not be a welcomed outcome for the BoC. Moreover, the central bank is also becoming increasingly concerned with the disconnect between solid wage growth despite weak labour productivity.
The continued resilience of the labour market raises the odds that the BoC may need to increase its policy rate in the near future. However, whether the BoC hikes further depends on inflation and the growth outlook. Nevertheless, it may require signs that underlying inflationary pressures are not moderating as quickly as expected for the BoC to hike again.
Alberta saw an anemic gain in employment in February after some months of strength. Moreover, while the unemployment rate moderated to 5.8%, the decrease was mainly the result of workers leaving the labour force. We continue to note that the unemployment rate in Alberta remains higher than the national measure. As a result, we observe some continued underperformance in wage growth in Alberta at 4.0% y-o-y, compared to 5.4% y-o-y in the rest of Canada. We also note that employment in Calgary has declined for a seventh consecutive month.
Employment increased by 21.8k in February, stronger than expectations. The unemployment rate remained at 5.0% and the participation rate at 65.7%. The participation rate is still 0.2 percentage points (pp) lower than before the pandemic, as workers left the labour force. If the participation was the same as before the pandemic, the unemployment rate would be 5.3%. The employment rate, the share of the population holding a job, edged lower to 62.5% from 62.14%, above its pre-COVID level. Wage growth accelerated slightly to 5.4% y-o-y from 4.5% y-o-y, close to the fastest pace in the current cycle.
The details show that the job gains in February were mostly full-time (+31.1k), while there was a small loss in part-time (-9.3k). In addition, the rise in employment was mainly in the private sector (+38.5k), while it declined in the public sector (-7.9k) and self-employed (-8.9k).
On an industrial level, the increase in employment was mainly in the goods-producing sector (+17.5k), with a modest gain in the service sector (+4.2k)
The details in the good-producing sector show that the job gains were in utilities (+7.5k), manufacturing (+6.8k), and natural resources (+5.0k), while there wer small losses in construction (-1.5k).
The increase in the service industry came from gains in health care (+15.3k), public administration (+10.0k), other services (+8.4), and transport and warehousing (+6.2k). These gains were partly offset by losses in building and business support (-10.5k), finance, insurance and real estate (-8.0k), information, culture and recreation (-7.8k), and education (-7.7k).
Despite the overall level of employment being above its pre-COVID level by 4.3 percentage points, only 10 out of 16 industries have a level of employment above its pre-pandemic level. The lagging sectors are: agriculture, trade, transport and warehousing, business, building and other support services, accommodation and food services, and other services. Employment in the accommodation and food services is still almost 10% below its pre-COVID-19 level.
In Alberta, employment was basically flat, increasing by a modest 1.6k in February. Despite the weak gains in employment, the unemployment rate edged lower to 5.8% from 6.0%. This is the result of a decline in the participation rate to 70.0% from 70.3%. The participation rate in the province is still 1.1 percentage points (pp) below its pre-pandemic level suggesting many workers are remaining on the sidelines. If the participation rate was at the same level as before the pandemic, the unemployment rate in the province would be 7.3%. The employment rate, the share of the population holding a job, decreased to 65.9%, marginally above its pre-pandemic level.
The job gains in Alberta were concentrated in the goods-producing sector (+6.8k), while there were some losses in the service sector (-5.1k). The increase in the goods-producing industry was mainly in manufacturing (+7.5k), natural resources (+4.7k), and utilities (+1.8k). The decline in the service sector was mainly in trade (-14.1k), education (-7.6k), and other services (-2.0k). These losses were partly offset by gains in transport and warehousing (+8.1k), health care (+6.3k), and information, culture and recreation (+3.8k).
Despite the overall employment being above its pre-COVID level by 5.6pp, 9 out of 16 industries have a level of employment above their pre-pandemic levels. The lagging industries are: agriculture, natural resources, utilities, manufacturing, information, culture and recreation, accommodation and food services, and other services. Employment in the accommodation and food services sector, the worst-hit industry, remains more than 15% below its pre-COVID-19 level. Employment in the manufacturing sector is 4% below its pre-covid level, underperforming the rest of the country.
On a regional basis, the data is published on a three-month average basis (see table below). Over the past three months, the province gained 14.0k jobs. Most of the gains were in Edmonton (+17.1k), with some more modest gains in Lethbridge-Medicine Hat (+2.5k), Wood Buffalo-Cold Lake (+1.1k), and Camrose-Drumheller (+0.7k). These increases were partly offset by losses in Calgary (-3.6k), Red Deer (-1.1), and Western Alberta (-1.0k). We note that employment in Calgary has declined modestly for a seventh consecutive month.
Compared to the pre-pandemic levels, all regions have employment above the pre-covid levels. Employment exceeds pre-covid levels the most in Edmonton (+7.5%), Calgary (+5.2%), Camrose-Drumheller (+4.4%), and Red Deer (+4.3%).
The unemployment rate for the province inched higher to 6.0%, with increases in most regions. The unemployment rate declined only in Wood Buffalo-Cold Lake (-0.4pp). The higher unemployment rate was led by Camrose-Druheller (+1.7pp), Lethbridge-Medicine Hat (+0.5pp), Western Alberta (+0.4pp), and Calgary (+0.3pp). It is important to note that the rise in the unemployment rate is partly the result of a higher participation rate in Camrose-Drumheller and Lethbridge-Medicine Hat.
The unemployment rate is the highest in Red Deer (+7.7%), Calgary (+6.7%) and Edmonton (5.9%). It is the lowest in Lethbridge-Medicine Hat (4.2%), Wood Buffalo-Cold Lake (4.5%), and Camrose-Drumheller (4.7%).
The employment rate for Alberta inched higher to 65.5%. The employment rate rose the most in Edmonton (+1.1pp), Wood Buffalo-Cold Lake (+1.1pp), and Lethbridge-Medicine Hat (+1.0pp). It decreased in Red Deer (-0.8pp), Western Alberta (-0.6pp), and Calgary (-0.5pp).
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