Category: Talent & Market Insights

Statistics Canada reported that the nation’s unemployment remained at 5.8% due to more people entering the job market while wage growth continued to be sluggish. Canada added 56,000 jobs in February. Weekly annual wage increases were up 2.0% and hourly wages increased by 2.3%, up from just 2% in January.

The Numbers

56,000: The economy gained 56,000 jobs in February.

5.8%: The unemployment rate remained at 5.8%.

2.0%: Weekly wages increased 2.0% over the last year.

The Good

The strong February figures follow an even bigger gain of 66,800 jobs in January. This is the best two-month increase in the job market since 2012. The unemployment rate was unchanged is because more Canadians joined the labour force. In the past 12 months, total employment grew by 369,000 or 2.0%, reflecting increases in both full-time (+266,000) and part-time (+103,000) work.

While the gains are still modest, wage growth began to pick up in February. Annual hourly and weekly wages increased by 0.5 percentage points over January. Economists welcomed the positive wage growth and the resilient job market which appeared to shrug off signals for concern in other parts of the economy:

“The weak economic data that closed out 2018 and soft momentum heading into this year has not yet had any impact on the jobs numbers,” Toronto-Dominion Bank economist Brian DePratto said. ” Labour markets didn’t get the memo.”

Ontario was the big winner again in February with an increase of 59,000 full-time positions. On a year-over-year basis, employment in the province increased by 2.7% or 192,000.

The Bad

The good news for Ontario in February was the exception since the job numbers for most of the rest of Canada remained flat or showed modest fluctuations. In Alberta, where the economy is heavily influenced by the energy sector, the unemployment rate increased. The CBC reported that the rate increase was spurred by an increase of those looking for work.

“Alberta’s employment level was mostly unchanged from January and last February, but the agency says the number of people looking for work has increased, pushing the provincial unemployment rate up to 7.3%. Calgary’s unemployment rate for February is even worse at 7.6%, up 0.3% from January. Edmonton’s unemployment rate also rose to 7.0% from 6.4% in January.”

The contrast to Ontario’s unemployment rate of 5.7% is not limited to Alberta. Prince Edward Island’s unemployment rate stands at 10.3% and New Brunswick’s at 8.5%. These maritime provinces have struggled with high unemployment in recent years contributing to a lop-sided jobs market which favors the richer and more populous provinces.

The Unknown

The Globe and Mail notes that one constant in the monthly jobs report numbers is that they appear to consistently defy analyst expectation.

“What’s an easy way to trip up an economist? Ask one to forecast Canadian job growth…Derek Holt, head of capital markets economics at Bank of Nova Scotia, pointed out the chronic shortfall in estimates after January’s report. Since the end of 2015, the economy had added nearly 900,000 jobs, as measured by the net change in employed persons. Economists called for 325,000 positions, or less than 40% of the total, based on the monthly consensus forecast of those surveyed by Bloomberg….

Economists have long struggled to pin down job gains. To some degree, that’s defensible. The LFS is often derided as a ‘random number generator,’ largely because the monthly change in employment comes with a hefty margin of error, typically around 29,500. For some perspective, since 2000 the Canadian economy has added an average of 18,600 jobs per month, or substantially lower than the margin of error.

Put another way, we typically don’t know whether Canada truly added or lost jobs from one month to the next. December provides a good example. The LFS said a net 8,700 jobs were created that month. But here’s another way of describing what happened: the true figure may have fallen between a gain of 37,200 jobs and a loss of 21,600 positions, after taking into account the margin of error. Even then, there’s a chance the true figure fell outside that range.

For economists, their forecasts have hit a particularly rough patch. Consider that from 2000 through 2015, the consensus amounted to 58% of the total number of jobs created during that period, versus 37% since then.

So, what’s going on? Douglas Porter, chief economist at BMO Nesbitt Burns, points to population gains. In a February research note, he noted that Canada’s population aged 15-plus increased by 432,100 in January from a year earlier, the largest 12-month increase in 43 years of records…

There’s also another factor at play: job growth, per the LFS, might simply be playing catch-up. Statscan has multiple measures of employment, including the payroll survey of employers, which many economists consider a more reliable gauge of job growth. Since the end of 2015, cumulative job growth was fairly similar between the surveys, before the LFS started to lag in 2018. January’s outsize gain went a long way to narrowing the gap.”

The Labor Department released its February jobs report which shows that U.S. employers added 20,000 jobs in February, well below analyst expectations. The unemployment rate decreased to 3.8% last month. Year-over-year wage growth increased to 3.4%, the best rate in a decade. U.S. employers have added to payrolls for 101 straight months, extending the longest continuous jobs expansion on record.

The Numbers

20,000: The economy added 20,000 jobs in February.

3.8%: The unemployment decreased to 3.8%.

3.4%: Wages increased to a rate of 3.4% growth over the last year.

The Good

Despite the low number of new payrolls added, the historic job creation streak continued. The change in total nonfarm payroll employment for December was revised up to +227,000, and the change for January was revised up to +311,000. After revisions, job gains have averaged 186,000 per month over the last three months.

The unemployment rate declined by 0.2 percentage points to 3.8% in February, and the number of unemployed persons decreased by 300,000 to 6.2 million. Among the unemployed, the number of job losers and those who completed temporary jobs (including people on temporary layoff) declined by 225,000.

This decline reflects, at least in part, in part, the return of federal workers who were furloughed in January due to the partial government shutdown. Those workers who were working part-time jobs for economic reasons are now in full-time positions. As one economist put it, “They now have paychecks and don’t need to drive Uber to make ends meet.”

A comprehensive unemployment rate that counts discouraged workers as well as those holding jobs part time for economic reasons, which is often called the “real” unemployment rate, fell to 7.3% in February from 8.1% in January.

The year-over-year wage increase of 3.4% is well above the rate of inflation. The result will likely result in more consumer spending that helps fuel the American economy.

The Bad

February’s report shows the weakest job growth since September 2017. While there are one-time factors such as the partial government shutdown and record cold temperatures in much of the country which may have contributed to the modest growth, it could also be an indicator of a slowdown in the job market in the coming months, the New York Times reports.

“With a single report, the six-month average rate of job growth has fallen to 190,000 from 234,000. That lower number is a better fit with everything else we know about the state of the economy — particularly a 3.8% unemployment rate and lots of anecdotal reports of scarce workers. Businesses can’t add people to the payrolls who don’t exist. Add in the ample evidence that the overall rate of growth is shifting down as trade wars continue to disrupt industries and as the impact of tax cuts fade, and a more modest rate of job creation makes sense. So job growth in the sub-200,000-a-month range seems a lot more plausible for the rest of 2019 — and yet more deceleration is a strong possibility.”

The Unknown

How significant is February’s weak jobs report? Many analysts caution that one report does not provide a clear indicator of long-term trends:

“Mark Hamrick, senior economic analyst at Bankrate.com, said “slowing job growth is to be expected over the coming year, one way or the other,” but blamed much of the February shortfall on a seasonal hiring slowdown in the construction and leisure and hospitality sectors. “It is fodder for a reminder that we cannot assume too much about a single monthly report.”

While the economic significance of the February report remains to be seen, some analysts argue that the overall fundamentals of the American economy remain strong and therefore this weak jobs report could essentially be an outlier:

“One month does not a trend make, and the United States economy remains very robust, especially when compared with sluggish Europe and slowing China. Oil prices are falling, which helps all sectors of the economy except, of course, oil. And while the trade deficit reached a record in 2018, that is a sign of strength not weakness.  Exports rose sharply, but imports rose even more, thanks to the booming American economy. And, by definition, capital inflows must offset trade deficits, so a lot of foreigners think the United States is a great place to invest.”

Having been surprised by the details of February’s report, those with a stake in the U.S. and world economy may be anticipating the results of next month’s report with an eagerness they have not felt in years.

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.”