June 04, 2021 | 09:19
Canadian Jobs: Making a Hab-it of Bad News
Canadian employment fell 68,000 in May, a bit of deeper drop than expected and following the heavy 207,100 setback the prior month. These days, the jobs data are as much a health report as an economic report, with various restrictions or openings dictating the pace. And, the biggest declines were posted in Nova Scotia and Ontario, both of which saw tighter restrictions through the spring. However, it is notable that the job losses spread to some other sectors not usually associated with lockdowns—construction and manufacturing both shed jobs last month.
Moreover, while most of the job loss in May was in part-time positions, full-time jobs also sagged somewhat (-13,800), only the second drop in the past year (after a bigger fall in April). Accordingly, the jobless rate rose for a second month in a row to 8.2%, even as the participation rate slid 3 ticks to its lowest level since last August. One small redeeming feature in the report was hours worked eked out a 0.1% rise, although they are still well down for all of Q2—reinforcing the point that the economy likely posted no growth this quarter.
By sector: The May decline wasn't quite textbook, as many industries saw moderate job cuts. While all of the usual victims did post declines—retail & wholesale trade, other services, and hotels & restaurants—the largest drop was in manufacturing (-35,900). This was the steepest decline in factory payrolls since the depths of last year's lockdowns in April/20. (In contrast, U.S. manufacturing jobs rose 55k last month.) And, despite the fiery housing market, construction also reported a second consecutive setback (-15,800), as Ontario was restricted to only essential projects.
By region: The jobs report did adhere more closely to the lockdown playbook on a regional basis. Nova Scotia (-22.2k) and Ontario (-31.6k) accounted for almost 80% of the job loss last month, and these two arguably saw the biggest net new restrictions over the spring. Two small provinces managed to churn out gains last month, while all the other six reported small declines. The two hard-hit provinces, not surprisingly, also reported some of the highest unemployment rates in May, with Ontario's rate popping up to 9.3% and Nova Scotia's jumping to 9.8%. On the other end, Saskatchewan is low at 6.3% (as that province added jobs last month), with Quebec next at 6.6%.
Bottom Line: The headline job loss is no major surprise, given still-tight restrictions in May. However, the overall tone of the release is a bit more concerning, with declines spread across many sectors and engulfing some full-time positions. The drift down in the participation rate bears watching as well, as the economy (presumably) re-opens in coming months. While we continue to look for a solid rebound in employment through the summer and into the fall, the slow-walk jobs recovery in the U.S. sounds a cautionary note. Moreover, for the very next report, it seems that a quick snapback may be out of reach, as restrictions will only be starting to lift by mid-month in some key regions. On balance, this report will (or should) pour some cold water on the view that the Bank of Canada will be well out ahead of the Fed when it comes to removing stimulus.