Category: Talent & Market Insights

The 39,100 jobs added in January beat analyst expectations while the unemployment rate remained steady at 5.0% as more Australians joined the workforce. The job growth was entirely due to full-time employment. Wage growth continues to be slower than many would hope for in the current tight job market.

Numbers

39,100: The Australian economy added 39,100 jobs in January.
5.0%: The Australian unemployment remained at 5.0%.
65.7%: Labour force participation rose to 65.7%.
+4: The Business Confident Index rose to +4 in the latest NAB release.

Upside

The Australian Bureau of Statistics (ABS) announced that employment rose by 39,100 in seasonally adjusted terms, surpassing forecasts for a smaller increase of only 15,000. The job increase was entirely attributable to full-time positions. New South Wales was the clear winner in the nation’s job market adding 47,200 jobs. The unemployment rate in New South Wales plunged to 3.9%. Since January 2018, full-time employment increased by 236,100, while part-time employment increased by 35,200. The unemployment rate remained unchanged because more Australians were attracted into the nation’s workforce.

The report also showed that the number of women in Australia’s workforce is at a record high and that the pay gap between men and women has fallen to a 20-year low.

Downside

The job gains in New South Wales were offset by more modest increases and losses in other states. Victoria had an increase of just 2,200 and Western Australia of only 800. The largest decrease was in Queensland which was down by 19,900 followed by South Australia with a decrease of 4,500.

The disparity in the employment situation among Australian states may indicate that “full employment” has not yet been truly achieved on a national level, as Business Insider Australia reports:

“While full employment may have been reached in New South Wales and Victoria, at 5 per cent, Ben Udy at Capital Economics says today’s data suggests full employment still has yet to be reached nationally.

‘We suspect that the natural rate of unemployment has declined in recent years and actually sits closer to 4.0 per cent,’ he says. ‘That would mean that the current unemployment rate of 5.0 per cent is still well above the natural rate.’

Given a plethora of downside risks facing the Australian economy this year, Udy is doubtful whether there’ll be any acceleration in wage growth this year.

‘Our view is that the housing downturn and weakness in the wider economy will mean that the unemployment rate may rise this year. If we’re right, it’s hard to see wage growth picking up pace anytime soon,’ he says.”

Unknown

Adding to the focus on the geographic disparities in Australia’s economy, a new study reported by the Sydney Morning Herald highlights the challenges for some of Australia’s young workers, with potential implications for the nation’s economic future. The article states:

“Up to one-third of all young people in some of the nation’s most marginal electorates are without a job or underemployed…with warnings many have skills that will be useless within a decade.

Compiled by the Foundation for Young Australians, the report points to parts of Queensland and Western Australia most at risk from a chronic mismatch between the jobs needs of young people and the skills they will take into the workforce.

It argues the economy is being short-changed $4.5 billion a year because so many young people are either outside the workforce or failing to get enough hours of employment every week.

Foundation chief executive Jan Owen said the mismatch between what young people learn and what they will need in future is one of the nation’s most pressing economic challenges.

‘To get to where we need by 2030, and avoid the economic and social crisis that is looming, we need a strong framework that delivers systemic change and that is based on evidence,’ she said. ‘Without an integrated approach we are likely to end up with even greater problems, with employers, education and training providers, workers and the national economy all losers.’”

The level of those working in the United Kingdom is at its highest point since comparable records have been kept. This is just one of the positive historic milestones reported in the February Labour Market Report released by the Office for National Statistics.

• Wages rose 3.4%, the highest year-over-year level in more than a decade.
• The number of people working in the UK rose by 167,000 to 32.6 million. This is the highest figure since records began in 1971.
• The unemployment rate remained at 4.0%, the lowest rate since the three months spanning December 1974 to February 1975.
• At 3.9%, the unemployment rate for women fell below 4% for the first time since records have been kept.
• 444,000 more people were working in the UK than a year earlier.
• 870,000 job vacancies were reported, the highest since comparable records began in 2001.

Where is Brexit’s Impact on the Job Market?

Another monthly report with record-breaking employment numbers seems to indicate that Brexit has not yet had an impact on the UK’s employment situation. However, as 29 March approaches, the date when the UK is scheduled to leave the European Union, there is still no formal agreement on post-exit details. Because of this, there are expectations that job growth will not continue at the current rate. As the Guardian reports:

“Anybody expecting the Brexit impasse to harm the UK’s labour market has so far been proved wrong. Employment is at its highest ever level, the number of job vacancies has hit a new record and the unemployment rate for women has dropped below 4 percent for the first time. Growth slowed in the final quarter of 2018, but the dole queues shortened. Crisis, what crisis?

One possibility is that because the latest jobs and wages data from the Office for National Statistics only covers the period to December, it might not capture more recent surveys suggesting that firms have become warier about hiring since the turn of the year.

Even so, the ONS assessment was unambiguous: the labour market remains robust after a 440,000 increase in employment over the past year. The strong demand for labour is being reflected in a number of ways: by wages growing faster than prices, by the 57,000 fall in the number of people on zero-hour contracts and by the fact that most of the jobs created were full-time.

Britain continues to be a jobs magnet. The number of workers from the EU – and eastern Europe in particular – has fallen but the drop has been more than compensated for by an increase in migrant labour from the rest of the world, primarily Asia and the Americas.

Employment is a lagging indicator. It tells us how the economy was faring in the past but is not always the best guide to what is going to happen in the future. And, clearly, if the UK were to leave the EU at the end of March without a deal there would be a period when the labour market would weaken. The duration of that period would depend on the extent of disruption and strength of the policy response from the Bank of England and the Treasury.”

Challenge for UK Employers: Record High Vacancies Combined with Skills Shortages

The booming job market can be interpreted as a sign of optimism by UK businesses. Why create jobs and hire workers unless growth is expected? Yet this optimism is tempered by the challenge of rising wages and a shortage of high-demand skills. The difficulties of hiring in this environment can result in a negative effect on economic growth. As reported by the BBC:

“Looking at the average earnings figures, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “With surplus labour extremely scarce and job vacancies rising to a new record high, workers are having more success in obtaining above-inflation pay increases.

‘Looking ahead, we doubt that wage growth will slip below 3% this year.’

Despite the wage increases and low unemployment figures, Suren Thiru, head of economics at the British Chambers of Commerce, did not think that struggling High Streets would benefit.

He said: ‘The uplift to consumer spending from the recent improvement in real pay growth is likely to be limited by weak consumer confidence and high household debt levels.

‘The increase in the number of vacancies to a new record high confirms that labour and skills shortages are set to remain a significant a drag on business activity for some time to come, impeding UK growth and productivity.’”

Exiting Britain: Honda Bids Farewell

Just before the February report was released, Honda announced that it was closing its plant in western England in 2021 potentially resulting in a loss of at least 3,500 jobs and possibly many more. The AP reports:

“Honda’s president and CEO, Takahiro Hachigo, said the decision was not related to Brexit, but was based on what made most sense for its global competitiveness in light of the need to accelerate its production of electric vehicles.

Still, experts say the uncertainty surrounding Brexit will likely have been a contributing factor in a decision like Honda’s. There is no clarity on what leaving the EU will mean. In a worst case, it could lead to heavy tariffs and border checks, raising costs and slowing deliveries.

That comes at a time when the industry is already in serious flux, with manufacturers shifting to cleaner cars, coping with more tariffs and a slowing global economy.

‘We still don’t know what sort of changes Brexit will bring at this point,’ said Hachigo. ‘We have to wait until we have a better idea about the situation.’”

While Honda may be taking a cautious approach to the ramifications of Brexit, other employers are pressing ahead with aggressive hiring plans. Brexit has not yet become a reality, although it is scheduled to happen next month.

Statistics Canada reported that the nation’s unemployment rate rose to 5.8% due to more people entering the job market while wage growth continued to be sluggish. Canada added 66,800 jobs in January which greatly exceeded analyst expectations. Part-time job increases outpaced full-time job growth. The number of private-sector positions grew by 111,500 in January for the category’s biggest month-to-month increase since the agency started reporting this statistic in 1976.

The Numbers

66,800: The economy gained 66,800 jobs in January.

5.8%: The unemployment rate rose to 5.8%.

1.5%: Weekly wages increased 1.5% over the last year. This is a 0.3% decrease from December’s wage growth figure.

The Good

The 66,800 jobs that were added to the Canadian economy were a welcome surprise since some economists were predicting a gain of only 5,000 jobs. This unexpected increase in jobs occurred during a time of volatility in the financial markets, low consumer confidence, falling oil prices and uncertainty over trade.

On a year-over-year basis, total employment was up 327,000 or 1.8%, with increases in both full-time and part-time work. The increased unemployment rate was due to more Canadians entering the job market.

In addition to good news for the private sector, there were healthy employment increases for Canada’s young people. The number of employed youth aged 15 to 24 was up 53,000 in January, split evenly between men (+27,000) and women (+26,000).

There were notable job increases in Ontario and Quebec, Canada’s largest provinces. The number of people employed rose by 41,000 in Ontario and 16,000 in Quebec where the uptick was driven by younger workers.

The Bad

The job gains in Ontario and Quebec contrasted with the employment situation in Alberta which posted declines for the second consecutive month. Employment was down by 16,000 in January with the unemployment rate increasing by 0.4 percentage points up to 6.8 per cent. In addition to the localized job losses, slow wage growth continues to be a concern.

While year-over-year average hourly wage growth in January for permanent employees was 1.8 per cent, which was up from December’s reading of 1.5 per cent, it was still well below the May 2018 peak of 3.9 per cent. The rate of average weekly wage growth actually decreased to the same rate of 1.5 per cent. This sluggish growth defies the conventional expectations of wages rising when unemployment is low, and Canadian economists are searching for answers.Coverage of The Bank of Canada’s Senior Deputy Governor Carolyn Wilkins’ thoughts on modest wage growth in the context of a strong job market noted:

“An economy with a tight labor market should be able to produce wage growth of around 3 per cent, according to Wilkins. She found an important factor for the sluggishness was lagging pay in oil-producing regions. There are also some other sectoral changes going on in the economy such as fast growth in service- sector jobs. But those don’t fully explain the phenomenon.

‘Even after accounting for these regional and sectoral factors, wage growth overall is still a bit short of what one would expect at this stage,’ she said. She outlined a list of other potential factors that included: skills mismatches, caution among workers to change jobs, reluctance to move, expensive housing in some markets, and global structural factors such as technological disruption and growing market concentration.”

The Unknown

How long will job growth continue in Canada? Some economists and business leaders fear that a recession may be imminent while others express optimism about the nation’s economic health.

“In baseball parlance, I’d say that we’re top of the ninth, with one out,” Gluskin Sheff + Associates’ chief economist and strategist told BNN Bloomberg’s Greg Bonnell in an interview on Friday.

Rosenberg also said the Canadian economy is more than 90 per cent of the way through the business cycle.

“The market action and all the volatility, the yield curve, the behaviour of cyclical stocks especially in the past six months, commodities – and, notwithstanding the knee-jerk bounce that we had in the opening weeks of this year – I think that the odds of a recession in 2019 are elevated,” Rosenberg said.

A contrasting viewpoint can be found in recently published reports by the nation’s leading financial institutions:

“While growth in Canada’s broader economy moderates, Canadian business owners are generally positive about their prospects, finds an economic outlook report from Bank of Montreal. The report identifies two themes playing out across the country.

“First, oil prices have again become a downside risk for the three producing provinces,” says Robert Kavcic, BMO senior economist, in the report. Second, “most provinces are coming off very strong runs and are in the process of moving back in line with their longer-run growth rates,” he says.

The report finds that businesses are investing in innovation to increase productivity, and expanding into new markets, such as the U.S., to increase growth potential. For example, while Alberta’s growth is forecast at only 1.5 per cent this year, innovation in technologies geared toward oil exploration and pipeline management remains a bright spot for its economy, as start-ups continue to emerge.

In a January economics report, RBC senior economist Josh Nye also said business confidence was holding up, despite a relatively soft handoff for GDP at the turn of the year because of energy-sector challenges. He cited Canada’s addition of 115,000 jobs in the last quarter of 2018 and an unemployment rate that fell to a 44-year low.

“Further, the Bank of Canada business outlook survey showed generally positive sentiment, he said.”

The Labor Department released its January 2019 Jobs Report which shows that U.S. employers added 304,000 jobs in January. The unemployment rate increased to 4.0% last month. Year-over-year wage growth remained at 3.2%, the best rate since the end of the recession. U.S. employers have added to payrolls for 100 straight months, extending the longest continuous jobs expansion on record.

The Numbers

304,000: The economy added 304,000 jobs in January.

4.0%: The unemployment increased to 4.0%.

3.2%: Wages remained at 3.2% growth over the last year.

The Good

The 304,000 jobs added beat analyst expectations and is notably higher than the average monthly job increase in 2018 which was 223,000. Wage gains remained steady at 3.2%, which is comfortably ahead of the rate of inflation. The participation rate, the measure of those who are part of the nation’s workforce, rose slightly to 63.2%, half a percentage point over January 2018’s 62.7%. This is the highest level of participation since 2013.

Jobs were created in several key sectors including Hospitality and Leisure at 74,000 and Education and Health Services at 55,000. 26,600 jobs were added to the Transportation and Warehousing sector while 20,800 new positions were created in the Retail sector.

The positive reception of January’s report by economists and analysts is summed up well by the Chief Investment Strategist of State Street Global Advisors quoted in Reuters:

“It’s great way to celebrate 100 consecutive months of jobs gains, which is a record. The report from top to bottom is very, very solid, top-line number beat. We did see average hourly numbers that continued to grow, but are not indicating any inflationary concerns that would cause the Fed to change its path on interest rates. Participation rate is the highest it’s been since 2013, and job gains were increasing pretty broad based across a lot of different categories, this jobs report is very, very solid.”

The Bad

The unemployment rate rose to 4.0% in part due to the federal government shutdown, the longest in U.S. history which ended on January 25. The increase was fueled by those unemployed Americans who classified themselves as being on a “temporary lay off” as reported by the New York Times:

“The shutdown does help explain why the unemployment rate ticked up to 4% in January. Unlike the monthly hiring figures, which come from a survey of employers and are based on their payrolls, the unemployment rate is based on a survey of households. In that survey, 175,000 more people than in the previous month reported themselves as being unemployed because of a “temporary layoff” — a total that included government workers.

“Where’s your shutdown impact? There it is,” said Brett Ryan, an economist for Deutsche Bank in New York. “It just showed up in the unemployment rate.”

January’s report also showed that the number of people who said they were employed part-time for economic reasons spiked by 490,000 to 5.15 million — 11 percent higher than December’s figures. While some of this increase may be attributed to government contractors who were not paid during the shutdown, it is an indicator that the full employment economy is not providing the necessary economic benefits for a large number of Americans.

The Unknown

While the long-term repercussions of the government shutdown are unclear, some career government employees worry that young people will no longer be attracted to working in the public sector, even in the traditionally competitive areas like diplomacy:

“I expect there will be some long-term repercussions of this [shutdown] in terms of really good people deciding this is not the career they signed up for,” one American diplomat posted in Europe who declined to be named said last week about younger people entering the foreign service.”

The repercussions may not be limited to those starting their careers opting out of the public sector and going into private enterprise. Current government workers who are discouraged by the recent shutdown may become a source of talent for the private sector in a very challenging labor market:

“In a tight job market, federal employees, many of whom are highly educated, would most likely not have a hard time finding other jobs. Jessica Klement, vice president of the National Active and Retired Federal Employees Association, says the effects of the shutdown on federal workers are likely to be long-lasting.

“Federal employees,” she says, “take great pride in the work that they do for the federal government. And every day for 35 days they turned on the television and were told, ‘You have nothing to worry about — you’re going to get back pay’ or ‘Are you even essential if you’re not working during this government shutdown?’ ”

That message, Klement says, will create “untold morale problems” that will play out over the next few “days, weeks and years.”

Australia’s unemployment rate fell in December to 5.0%, beating analyst expectations that it would remain at November’s 5.1% level. Unemployment is now at its lowest level since June 2011. The job gains were due to an increase in part-time employment which rose by 24,600, offsetting a decline of 3,000 full-time workers. Despite the tight job market, wage growth remains sluggish.

Numbers

21,600: The Australian economy added 21,600 jobs in December.

5.0%: The Australian unemployment decreased to 5.0%.

65.6%: Labour force participation fell to 65.6%.

+3: The next index will be reported on January 28. Therefore, the latest index is the December release which showed that according to the NAB, the business confidence index fell to +3 index points.

Upside

According to the December Labour Force figures released by the Australian Bureau of Statistics (ABS), employment increased by 21,600 in seasonally adjusted terms. Total employment now stands at 12.714 million, the highest level on record. Since December 2017, full-time employment has increased by 162,000 while part-time employment increased by 106,600.

Australia’s unemployment rate fell in December to 5.0%, beating analyst expectations that it would remain at November’s 5.1% level. Unemployment is now at its lowest level since June 2011. In seasonally adjusted terms, the largest increase in employment was in Queensland (up 11,600 persons), followed by Victoria (up 10,500 persons) and New South Wales (up 3,800 persons).

Many economists greeted 2018’s final report with reserved satisfaction. Westpac’s Justin Smirk wrote:

“Employment ended 2018 with a sound run. In the year to December total employment grew 268,600, or 2.2%, which matches the six month annualised pace of 2.2%. While it is true that the momentum in the Australian labour market eased through 2018 — annual growth peaked at 3.6% in January — it can still be described as sound.”

Downside

The job gains were due to an increase in part-time employment which rose by 24,600, offsetting a decline of 3,000 full-time workers. December was the second month in a row that full-time employment fell. The slow rate of full-time job growth is a cause for concern as the Sydney Morning Herald noted:

“There are some signs of a slowdown with the total number of full-time jobs created in the past 12 months down more than 40% on the record-breaking performance of 2017. For the second consecutive month, full-time employment edged down nationally while the under-utilisation rate also remained elevated at 13.3%.”

The under-utilisation rate includes both those who are unemployed and those who are under-employed. The labour force participation rate fell by one-tenth of a percentage point, reversing last month’s increase.

Unknown

Despite a healthy job market, wage growth in Australia remains frustratingly low. As Your Money contributor David Ross writes:

“Unemployment hasn’t been this low since 2012…Meanwhile, jobs vacancies are up 13.6 per cent on last year at 6.5 year highs, and business profits are up 13.2 per cent in 2018’s September Quarter on 2017’s. These are healthy statistics for the Australian economy. But for another key metric – wage growth – it has been a different story. Indeed, those Australians who were lucky enough to receive a pay rise last year likely saw one which fell flat in the face of those handed out in the years of the mining boom, when Australian wages went up as much as 1 to 2 per cent year on year, accounting for inflation.

‘Don’t believe we’re living through a Golden Age in the economy,’ University of Sydney Business School Professor John Buchanan told YourMoney.com.au. ‘The labour market has seen a significant deterioration for many people, It’s just becoming clearer for more people to see. It’s been something coming for quite some time.’

Figures released by job-seeking website Indeed show that every industry is now recording wage growth in the past year below their decade average. And that’s despite the number of open and unfilled job listings growing. So the big question for many is: where’s my pay rise?”

As 2018 drew nearer to a close and uncertainty over Brexit threatened to topple the stability of the government and political clashes intensified, the jobs market in the UK simply shrugged and continued to post record numbers.

January’s report published by the Office for National Statistics and includes the following details on the three months covering September through November 2018:

• Wages continued to rise at their highest level in a decade.
• The number of people working in the UK rose by 141,000 to 32.53 million. That is the highest figure since records began in 1971.
• The unemployment rate was 4.0%, its lowest since the quarter spanning December 1974 to February 1975, well before most of those in today’s UK workforce were born.
• There were 328,000 more people working in the UK than a year earlier.

Surprise at a Robust Report

Given the uncertainty surrounding Brexit, some economists were anticipating a report that signaled a slowing down of the jobs market, so the good news in January’s report came as a pleasant surprise. As a BBC economic correspondent noted:

“At first blush the most surprising thing about the jobs market as portrayed by the latest figures from the Office for National Statistics is how robust it is. All this talk of Brexit uncertainty and yet employers continued to take people on. The number in work and the proportion in work continued to hit a new record – as it has done now, more or less continuously, for years. And the bulk of the new jobs were full-time; there are now a record 24 million full-time jobs in the UK.

Is the jobs market simply ignoring all the Brexit-induced political chaos? Does this confirm suspicions that warnings of slower growth owing to the prospect of a no-deal Brexit was merely Project Fear? The answer to the latter question is ‘no,’ and to the former ‘we don’t know yet.’

The key is that jobs figures trail the rest of the economy. Firms that took people on in the September to November period will have decided to do so in the summer, when confidence was higher and the politics less fraught. So we will still have to wait a few months to know if Brexit uncertainty has hit the jobs market or not.”

Job Vacancies and Skill Shortages: UK Employers Ramp Up Hiring Plans

The number of job vacancies rose by 10,000 to a record high of 853,000. The Financial Times reports that most UK employers plan on expanding their headcount this year due to concern over the shortage of skills by those who could fill these vacancies:

“Skills shortages have prompted UK business leaders to ramp up their hiring plans, a survey has revealed, at a time when employers face mounting pressure over a tightening labour market. About 61% of British executives, as opposed to 53% of global leaders, expect to increase their company headcount this year, according to an annual PwC report, which includes responses from 1,378 chief executives globally and 220 from the UK. A year ago just over half of UK chiefs planned to increase staff numbers.

PwC’s CEO report comes as UK data on Tuesday revealed that real wages in the three months to November rose at their fastest rate in two years, driven in large part by a tight labour market. Unemployment fell to 4% over the three-month period, according to the Office for National Statistics, the lowest since the winter of 1974, resulting in higher wages but making life harder for companies seeking to hire, with labour shortages opening up in some parts of the country. Almost eight out of 10 UK chief executives marked a shortage of skills as their top fear, down from 83% a year ago. The leaders were increasingly pessimistic about their ability to increase revenue in the year ahead, according to PwC’s Monday report.”

“I hope it will last”

With the UK scheduled to leave the European Union in March, there is still no clear plan of what Brexit will look like. Despite all the tension and uncertainty, the jobs market continues to gain momentum. As Oscar Wilde wrote: “This suspense is terrible, I hope it will last.”

Canada’s unemployment held steady in December as job creation neared market expectations following a large increase in hiring November. Statistics Canada reported that the Canadian economy added 9,300 jobs last month. Market expectations were for an increase in employment of 10,000, according to economists at Royal Bank of Canada. In November,  Canadian employment rose by 94,100, so the jobs added in December are a steep decline from the previous month. Canada’s unemployment rate was 5.6% in December, unchanged from November when it fell to its lowest level in more than 40 years.

The Numbers

9,300: The economy gained 9,300 jobs in December.

5.6%: The unemployment rate remained at  5.6%.

1.8%: Weekly wages increased to 1.8% over the last year. This is a 0.3% increase from November’s wage growth figure.

The Good

In 2018, employment increased by 163,000 or 0.9%. In 2018, the unemployment rate fell 0.2 percentage points to 5.6%. Full-time employment continued on an upward trend in 2018, growing by 185,000 or 1.2%, while part-time employment barely changed.There were some job gains in important sectors in the Canadian economy in December including transportation and warehousing; healthcare and social assistance as well as manufacturing. 

Manufacturing added 23,900 jobs which is an increase of 1.4% in a one month period.

The year had notable gains for Canadian women and older male workers. Among the core-working-age population (aged 25 to 54), employment in 2018 increased notably for women (+126,000 or +2.2%) and for men (+61,000 or +1.0%). At year end, the unemployment rate among this age group was 4.6% for women and 4.8% for men. For men and women aged 55 and over, employment rose by 50,000 (+1.2%) in 2018, with most of the increase among men (+43,000 or +2.0%), whose unemployment rate fell 0.8 percentage points to 5.3% over the period. For women in this age group, employment was little changed but remained strong, with their unemployment rate at 4.6%.

The Bad

The 0.9 per cent jobs growth rate in 2018 shows that the rate of growth has slowed compared with 2017 (+2.3 per cent) and 2016 (+1.2 per cent). Lackluster wage growth continues to be a concern and even a mystery as The Financial Times notes:

“Overall, average hourly wages increased two per cent in December from a year earlier, lifting the five-month trend to about 2.2 per cent. So, after several years of good-to-great aggregate employment growth, wages are only keeping pace with inflation. That’s as odd as it is disappointing.

Before this year, the jobless rate rarely fell below six per cent. Now it’s the ceiling. The unemployment rate was 5.6 per cent in November and December, the lowest in data that dates to 1976, and it has brushed six per cent only twice since November 2017.

With hiring at levels that economists associate with full employment, you’d expect stronger upward pressure on salaries. But for whatever reason, that’s not happening.”

The Unknown

Some experts consider early 2019 to be the late stages of a positive economic cycle for Canada, setting off speculation on when the next recession will start and generating concern in provinces like Alberta which have experienced recent economic difficulties:

“‘We are in the late stages of a business cycle,’ Craig Alexander, chief economist of Deloitte said. ‘That doesn’t mean that a recession is around the corner, but we need to recognize that we’re 10 years into an economic recovery, expansion. Business cycles are typically eight to 10 years long.’

Alexander said markets are probably overreacting to the possibility that another downturn could be almost upon us. He thinks the more likely case is that growth will continue to slow.

The economy’s evolution will have different impacts depending where one lives, he added.

For example, the energy sector faces big challenges.

Part of it comes from the recent plunge in oil prices, but there’s also been an extra discount on the price of western Canadian crude caused by transportation bottlenecks out of the Alberta oilpatch.

‘This is sad news for Alberta,’ Alexander said. ‘They’ve only barely recovered from the last recession.’”

The Labor Department released its December 2018 Jobs Report which shows that U.S. employers added 312,000 jobs in December. The unemployment rate increased to 3.9 percent last month. Year-over-year wage growth increased to a 3.2 percent pace as the best rate since 2008. U.S. employers have added to payrolls for 99 straight months, extending the longest continuous jobs expansion on record.

The Numbers

312,000: The economy added 312,000 jobs in December.

3.9%: The unemployment increased to 3.9 percent.

3.2%: Wages increased 3.2 percent over the last year.

The Good

The 312,000 jobs added greatly beat analyst expectations. After revisions to the October and November data, the U.S. added a net 2.64 million payrolls in 2018, the best year for job growth since 2015. Wages, which had been slowing rising for much of 2018, have begun to pick up more quickly. December’s year-over-year increase hit 3.2 percent. While the unemployment rate increased to a five-month high, it is not a cause for concern because the participation rate stands at 63.1 percent and is the highest since September 2017. Reaction to the report has been overwhelmingly positive. As one Bloomberg economist noted:

“This is the strongest employment report of this economic cycle – hands down. While we’ve seen greater job gains in some months, the plus-300,000 number along with another increase in average hourly earnings clearly signals that the economic expansion ended 2018 on strong footing. Perhaps most surprising was the two-tenths rise in the unemployment rate due to an increase in participation. It’s one month of data, but talk of the Fed cutting rates in the near future should be off the table for now.”— Tim Mahedy, Bloomberg Economics

The New York Times reported even more jubilant reaction:

“It’s an unequivocally phenomenal report all the way around,” said Ellen Zentner, chief United States economist at Morgan Stanley. “Anyone that finds something negative in this report is simply cherry picking.”

Economists offered raves that could appear on a movie poster or a book jacket — “Extraordinary!” “Blowout,” “Wow!” The figures, they said, offer a resounding response to the question of whether a recession is imminent: “Never mind!” said David Berson, chief economist of Nationwide. “The fears of the economy tipping into a recession now have clearly been overstated.”

The Bad

While there may be no notable negative points in the jobs report, the U-6, or underemployment rate, was unchanged last month at 7.6 percent. This measure includes part-time workers who want a full-time job and people who are less active in seeking work. This is a possible indication that companies that are contending with a tight talent pool may not be reaching the right part-time workers who would prefer to onboard as full-time workers.

A challenge for employers may be an emerging trend of offering part-time workers the same benefits as full-time employees. Receiving “full-time” benefits can also remove an incentive to look for full-time work.  As the Seattle Times reports:

“Almost half of the 391 companies surveyed by the International Foundation of Employee Benefit Plans now offer the same health insurance coverage for all employees. About a third offer paid maternity or parental leave to their part-time workers, too, the survey found.”

The Unknown

The tight labor market may increase pressure to allow greater immigration to the U.S. or to find a solution that will allow foreign workers to fill the gaps in the country’s workforce. Like the US, Japan is facing a declining birthrate and an aging population which has led to recently passed legislation aimed at attracting foreign workers:

“Japanese lawmakers have passed controversial legislation expanding the number of semi-skilled foreign workers who can live and work in the notably insular nation for up to five years.
Japan has been pressed to make the change because of a critical labor shortage that results from its rapidly aging society and low birth rate.

Japan’s upper house of parliament passed the law 161 to 76 just after 4 a.m. Saturday local time, after a day when the opposition parties tried to unsuccessfully to block the measure.

The law will go into effect in April 2019.

The legislation has been viewed as a last-resort measure by Prime Minister Shinzo Abe’s ultra-conservative government to address a severe shortage of workers in 14 industries, including restaurants, nursing, construction and agriculture.”