January 08, 2021 | 09:14
Canadian Job Gains Shut Down
Canadian employment fell by 62,600 in December, compared with consensus expectations of a moderate setback and close to our -50,000 call, following seven months of recovery. There's little mystery behind the pullback, as lockdown measures tightened in many key regions in the lead-up to the mid-month survey. In particular, restaurant & hotels saw a hefty 56,700 drop amid restrictions on dining-in, which alone accounted for almost the entire job drop. It wasn't a clean run of weakness, however, as a number of sectors still churned out gains and some measures in the report were still slightly positive. For example, full-time jobs actually managed to rise 36,500, and average wages pushed back up and are now +5.6% y/y (with the outsized gain in part reflecting the loss of lower paying positions). And while hours worked slipped 0.3% m/m, the first drop since April, they still managed to rise at a hearty 15.9% a.r. for all of Q4 thanks to big gains earlier in the quarter. Finally, the jobless rate ticked up notch to 8.6%; while slightly less bad than we expected, that's still up 3 ppts from a year ago.
The December move left employment down 571,600 (or 3.0%) from year-ago levels, the deepest annual decline since 1982 (but far better than the April reading of -15% y/y). It's also a notably milder slice than seen in the U.S. surveys—the household survey reported a 5.6% y/y decline, while the payrolls report was down 6.2% y/y in December. Canada's payroll support measures (i.e., CEWS) has likely played a big role here in the relative performance of employment compared with the U.S., especially with Canadian GDP falling much further in 2020 (Canadian Q4 GDP was likely down about 4% y/y vs. a drop of little more than 2% y/y stateside). Note that a 332,300 y/y decline in accommodation & food services employment alone accounted for 58% of the annual job loss.
The industry breakdown displayed almost a textbook response to the new restrictions, with the weakness dominated by affected sectors. Beyond the hit to restaurants, other areas of weakness included culture & recreation (-18.8k), and other services (-30.8k). On the flip side, manufacturing rose 15,400, and both professional services (+16.8k) and public administration (+13.7k) reported solid gains. Notably, there were as many positives as negatives among various industry sectors (8 to 8), again highlighting the split personality of the economy. Notably, the split is much more a story of sector by sector, rather than by region, as 9 of the 10 provinces reported job declines (B.C. was the fortunate exception), and none really stood out on the low side.
Bottom Line: Today's employment result was very close to downbeat expectations, with even the focus of the job losses exactly as expected (restaurants). With restrictions broadening and lengthening since the December survey, we may well see another pullback in next month's report. But the good news, such as it is, is that Shutdown 2 is imposing a much less severe economic cost than in the spring, especially in sectors not directly affected. On balance, we are unlikely to adjust our forecast meaningfully as a result of the jobs data (and other economic indicators from December earlier this week). Overall, the big picture is that the economy has proven to be a bit more resilient than many expected to renewed restrictions—good news—but those restrictions look to last much longer than expected—offsetting bad news.