Canadian Job Losses Resume; Unemployment Rate Rises
Canadian Job Losses Resume; Unemployment Rate Rises
After a surprising 35,900 rise in employment in April, Canadian labour markets returned to shedding jobs with employment falling 41,800 in May. A return to declining employment had been widely expected given the announced shutdowns in the auto sector in May. The unemployment rate resumed its upward trajectory, rising to 8.4% after remaining unchanged at 8% in April.
The overall decline in employment largely reflected a 58,400 drop in manufacturing employment likely as a result of the shutdown of Chrysler in May. More modest declines in construction, natural resources and agriculture resulted in employment in goods-producing industries dropping 66,000. Some offset was provided by service-producing jobs, which rose 24,200. Gains in public administration (19,000) and trade (11,800) were partially offset by declines in transportation and warehousing (down 15,700) and finance, insurance and real estate (down 9,200).
The weakness in the manufacturing sector translated into a 59,700 drop in jobs in Ontario, which sent the provincial unemployment rate up to 9.4% from 8.7% in April. Newfoundland and Labrador was the only other province to show a decline in the month (down 1,700).
The weakness in labour markets is starting to register a more pronounced drop in wage growth. The year-over-year gain in average hourly wages for permanent workers dropped to 3.2% in May from 4.3% in April.
The resumption of job losses in May re-establishes the point that Canadian labour markets remain weak. However, the weakness was largely skewed towards the Ontario manufacturing sector. As well, the cumulative decline Canadian employment during the last three months of 67,200 is much less pronounced compared to the 232,000 drop recorded in the previous three-month period. This provides support to the view that, following the 5.4% drop in first-quarter GDP, its pace of decline will ease in the second quarter, with the improving trend continuing through the end of the year.
To ensure that this scenario plays out, the Bank of Canada has reiterated its commitment to maintaining the current low overnight rate at 0.25% through the end of the second quarter of 2010. Quantitative easing remains a policy option as well, although it is likely to be held in reserve in the event that declining growth remains unabated through the end of this year.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
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