Posted on December 2, 2016

Canadian Jobless Rate Falls as Labour Force Shrinks

Following four consecutive months of job gains, Canadian employment increased by 11,000 (or 0.1%) in November. Economists had expected hiring to decline by 15,000 according to the Bloomberg News survey. All of the rise in employment, however, was in part-time jobs, as full-time hiring fell by 8,700. This pattern is particularly worrisome as over the past 12 months, all of the net rise in employment has been in part-time work. Nationwide, part-time work has grown by 6.4% and full-time has fallen by 0.2% year-over-year.

The jobless rate fell unexpectedly by 0.2 percentage points to 6.8% as fewer people were looking for work. This is the first time the unemployment rate has fallen in five months.

The fourth straight monthly jobs gain is another boost to an economy healing from a collapse in commodity prices and business investment. Output growth rebounded to a 3.5% pace in the third quarter, and Governor Stephen Poloz said Monday he would only cut his 0.5% benchmark interest rate if there was another shock. His next rate decision is Wednesday.

The November jobs report highlighted the continued weakness in the oil sector. Unemployment in Alberta surged to its highest level in more than two decades to 9.0%, and in the manufacturing region of Quebec, it fell to a record low 6.2%; however, most of the rise in discouraged workers was in Quebec where the labour force dropped by 20,300, the largest drop since December 2014.

Service companies hired 31,200 workers, with almost half of those in the financial services and real estate sector. Goods producers cut back by 20,600, as manufacturing jobs dropped by 11,900 and construction fell 14,400.

The number of hours worked rose 1.1% in November from a year earlier. Average hourly wages of permanent employees grew 1.5% from a year earlier, slower than the 1.8% pace in October.

Clearly, the Bank of Canada will remain on the sidelines next week. Despite stable monetary policy in Canada, however, mortgage rates are rising reflective of the rise in market yields since President-elect Trump won the US election. Some mortgage rates in Canada are priced off of the 5-year government of Canada bond yield, which has risen more than 30 basis points since the election.

Provincial Unemployment Rates in November In Descending Order (per cent)
(Previous months in brackets)

   –– Newfoundland and Labrador     14.3 (14.9)
— Prince Edward Island                  10.8 (11.7)
— Alberta                                           9.0 (8.5)
— New Brunswick                             8.7 (10.0)
— Nova Scotia                                   8.0 (7.6)
— Saskatchewan                               6.8 (6.9)
   — Ontario                                           6.3 (6.4)
— Quebec                                           6.2 (6.8)
— Manitoba                                        6.2 (6.4)
   — British Columbia                           6.1 (6.2)

US Payrolls Rise As Jobless Rate Falls to Nine-Year Low

The November jobs report in the US provided a mixed picture as wages and participation rates–two closely watched indicators–showed disturbing declines. The headline payrolls gain was close to expectation, posting 178,000 net new jobs–just shy of the average monthly gain this year. Year-to-date, employers have added an average of 181,000 jobs per month. But the performance has been inconsistent–with a low of 24,000 in May and a peak of 271,000 in June. November’s gain of 178,000 signals steady hiring and more progress toward the Fed’s goal of full employment.

The unemployment rate fell to a nine-year low of 4.6% from 4.9% in the previous month on a drop in the number of people in the workforce. One of the most troubling developments in recent years is a drop in the labour-force participation rate. Its decline is partly because baby boomers are retiring. But the rate for prime-age workers, 25 to 54, has also fallen, matching a 30-year low late in 2015.

Another piece of good news, however, is that the broader measure of unemployment, which includes people stuck in part-time work and people who have stopped looking, fell from 9.5% in October to 9.3% in November.

Even with tight labour markets, the news on wages was disappointing. Average hourly earnings fell by 0.1% from the prior month, the first decline since December 2014. They rose 2.5% over the past twelve months, following a 2.8% gain in October.

Other indicators show spotty weakness in the jobs market. Factory payrolls fell once again and retailers reduced payrolls going into the holiday season.

Despite this mixed picture, the headline jobs gain and the fall in the jobless rate assure that the Fed will raise rates when they meet again in December 14.