Canadian Labour Market Adds Jobs, But Losing Steam
Canadian Labour Market Adds Jobs, But Losing Steam Canadian economy adds 9,500 jobs in October Unemployment rate edges up to 6.2%
Once again, the Canadian employment report surprised on the upside. Despite an uptick in the unemployment rate to 6.2% (previously 6.1%), employment rose by 9,500 jobs in October, almost a mirror image of the -10,000 that markets were expecting. But while the headline number suggests that the Canadian labour market is still healthy, the details of the report suggest otherwise. In October, the primary driver of employment growth was the public administration sector (+40,000), which was largely due to short-term hiring related to the federal election that took place mid-month. Elsewhere, job losses were fairly widespread, with 11 of the15 categories posting declines, albeit following a generally strong showing in September. The weaker underbelly in the October data provide us with a glimpse of what is likely to flow from the job reports in coming months.
Given that employment is a lagging indicator of growth, it has taken some time for the slowdown in the real economy - which has become more pronounced in recent months - to show up in the data. However, we are beginning to see evidence that the sectors that have been pumping up Canada’s job tally so far this year are starting to lose steam. For one, the construction sector, which has been propping up job growth the most this year, shed 9,000 jobs in October. While only one data point, we expect the decline in construction jobs to continue in the coming months, driven by lower home starts and softening renovation activity.
Similarly, the accommodation and food industry, which had added a net 60,000 positions through August, has since turned the corner, losing 43,000 jobs in the past two months. This comes as little surprise given that discretionary spending on items such as these is the first to soften when the economy slows.
The public administration sector has now tacked on a net 49,000 new jobs this year. However, October’s massive gain is inflating this figure, and we don’t expect to see the government creating jobs at this rate going forward as several federal and provincial Finance Ministers face the specter of deficits.
A softening domestic economy, an uncertain global economic climate and weak export demand will likely translate into slower hiring activity in the coming months. TD Economics forecasts real GDP to contract by 2.6% in the fourth quarter and 0.5% in the first quarter of next year and to grow by a meager 0.8% in the second quarter. In this environment, look for employment to head lower over the next three quarters, driving the unemployment rate up above 7%.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
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