September 09, 2022 | 09:13
Canadian Jobs: Summer of Discontent
Canadian employment fell by 39,700 in August, the third consecutive jobs decline, which this time we can't pin on a lack of workers. The details of the report weren't great either, with full-time jobs dropping a hefty 77,200, and both goods-producing and service industries falling. However, note that the quirky/volatile education sector reported a whopping 49,500 decline, and it has fallen for three straight months as well, alone accounting for more than 70% of the overall job losses in that stretch. Still, the overall employment drop drove up the unemployment rate five ticks—a big move—to 5.4% from the 50-year lows in June/July (the part rate nudged up a tick). At the same time, aggregate hours worked were flat and are on course for a decent rise of around 0.8% a.r. for all of Q3. Finally, even with the sag in jobs over the summer, wages remain steamy, with average hourly wages ticking up to 5.4% y/y. Aside from the weirdness in the first year of the pandemic, that's the fastest pace of wage gains in the 25 years of history for this series.
By industry: Beyond the heavy drop in education (which may well be reversed next month), construction was the other notable weak spot (-28,200), and this setback is probably a lot more meaningful amid the housing slowdown. Those two components accounted for the bulk of the weakness, with half of the industry sectors managing to grind out gains.
By region: Six provinces saw job declines, with notable softness in B.C. (-28,100), Ontario (-19,200) and Manitoba (-10,000). Quebec was at the other end of the spectrum with a 27,200 gain, helping it boast the lowest jobless rate in the country (4.5%)—a noteworthy result with the provincial election less than a month away. Even so, every single province saw a higher jobless rate in the month, albeit with many bouncing off multi-decade or even all-time lows.
Bottom Line: While we can readily find some "yes, buts" in this release, there is no debating that conditions are cooling quickly, with the pullback in construction a clear indication that rate hikes are beginning to bite. That cooling fits neatly with the view that the Bank of Canada will further moderate the pace of hikes and may indeed be getting close to the peak (we see another 50 bps of total rate hikes from here). However, the steady upward grind in wage growth and the stability in overall hours worked suggest that the Bank won't back down anytime soon. After all, even with the jump in the unemployment rate, it's still at a level (5.4%) that had been seen only once in the 45 years before the pandemic.