August 07, 2020 | 09:26
July Jobs Jump, But Still Wood to Chop
Canadian employment rose by a sturdy 418,500 in July, digging further out of the deep hole from the spring shutdown. While less forceful than the prior month's near-1 million rise, the July job add was still a touch above expectations and helped carve deeper into the towering jobless rate (it fell 1.4 ppts for the second month in a row to 10.9%). The key measure here is that with the three-month comeback, employment is now back to 93% of pre-virus levels, a bit better than the comparable U.S. tally of 91.6%. One small quibble with the result was a heavy skew to part-time positions, which accounted for more than 80% of July's gain. Even so, total hours worked still rose a meaty 5.3% in the month (a very rough proxy for GDP); and, they are poised to rise at a towering 70% annualized rate in Q3, even with no further gains in the next two months. Meantime, average hourly wages continue to slowly climb down the mountain, as workers return to their jobs, but the pace remains rapid at 6.3% y/y (versus a pre-crisis trend of around 4%).
By sector: Job gains were sprinkled across most sectors, but the biggest gains were, not surprisingly, seen in the areas that had been shut down the hardest. Both retail & wholesale trade and hotels & restaurants added just over 100,000 positions in July. Notably, the former sector (retail) is now much closer to recouping all of its losses than the latter; hotels & restaurants are still more than 23% down y/y, by far the weakest sector. The key manufacturing and construction sectors both clocked in with solid gains, but both are roughly in line with the overall economy on a year-on-year basis (which is still down 6.3% y/y). Notably, the same holds true for the goods- and services-producing industries; i.e., both are down a bit more than 6% y/y.
By region: Similar to sectors, the gains were reasonably evenly spread across the country, as almost every province re-opened. Technically, Toronto was yet to fully re-open by the mid-July survey week, but that city's gains were still comparable to the rest of the province and country. Still, since Ontario's reopening has lagged a bit, it remains the furthest from pre-crisis job levels at 91.7%. This points to another decent gain in August as that province catches up with the others. Not surprisingly, the provinces that had initially been less hard-hit by the virus have opened more quickly and are now boasting the lowest jobless rates in the country. Manitoba, Sasky, New Brunswick all posted single-digit rates last month, along with Quebec. In contrast, Alberta's is second highest at 12.8%, even with a sharp fall in July.
Bottom Line: For a change, employment was relatively close to expectations in July with a solid advance, and we would look for something roughly comparable in August as Ontario more fully reopened. However, even then, it's clear that fully recouping the shutdown losses will be a much lengthier affair, and the gains will be harder to come by now. True, with 55% of the initial job losses now reversed, there are going to be some quite impressive-looking economic figures in the weeks ahead; but regaining the remaining 45% of job losses (i.e., just over 1.3 million jobs to go) is the big challenge.