EconoFACTS

February 10, 2023 | 09:24

Raindrops of Jobs Keep Falling on Our Head

Economist

Chief Economist and Managing Director
Economics

Douglas Porter has over 30 years of experience analyzing global economies and financial markets. As Chief Econom... (Read more)

Douglas Porter , CFA

Chief Economist and Managing Director
Economics

Douglas Porter has over 30 years of experience analyzing global economies and financial markets. As Chief Econom... (Read more)

And you thought the U.S. jobs report was strong ...

Canadian employment soared 150,000 in January, the largest non-pandemic monthly rise on record and a loud echo of the rollicking U.S. jobs report a week ago. Even in percentage terms, the 0.75% m/m gain is larger than anything seen in the 40 years before COVID. Clearly, a relatively mild winter helped, but the underlying jobs picture remains incredibly robust. Much of the huge increase reflects a massive advance in the underlying labour force (the participation rate jumped 3 ticks to 65.7%), as the unemployment rate was unchanged at a tight 5.0%. The big job gain was mostly in full-time positions (+121,100), so total hours worked rose at a very strong 0.8% m/m, pointing to solid GDP growth in Q1—that may be an exaggeration of the economy's underlying strength, but it's also pretty far from the start of a recession. The only morsel of relief for the BoC was that average hourly wages cooled a bit to 4.5% y/y (from 4.8%), although this likely reflects the composition of new jobs (heavily in retail and hospitality).

Note that actual, or non-seasonally adjusted, employment fell by 125,000 in January—prior to the pandemic, a "normal" January would see a job loss of 250,000-to-300,000 in unadjusted terms. So, evidently, there simply were far, far fewer layoffs than in a normal year at the start of 2023. Instead of an actual hiring boom, what we instead saw last month was a layoff freeze, given how hard it is to find workers in the current environment. To be clear, this is not to dismiss the strength in the headline number; the data are seasonally adjusted for a reason. It's more to explain what the underlying story may be in this complicated backdrop.

By sector: The biggest of the big seasonally adjusted gains in the month were among retail & wholesale trade (+58.7k), health care & social assistance (+40k, though that follows a similar drop the prior month), and education (+18.4k). Construction was strong at +15.8k, but not exceptional, while hotels & restaurants rose 12.4k. Even manufacturing had a decent month (+7.3k). It was by no means a clean sweep, though, as five service sectors reported small declines (including finance and tech), while agriculture dipped as well. The fact that not all sectors reported massive increases actually makes the incredible headline rise a bit more credible.

By region: Similar to the industry breakdown, not all provinces saw gains (7 of 10 were up). The strength was heavily concentrated in central Canada, with Ontario up 62.8k (or 0.8%) and Quebec adding 47.4k jobs (+1.1%). The latter saw its jobless rate fall to just 3.9%, a nation-wide low. Alberta also saw a big job rise (+20.7k), yet its unemployment rate jumped 4 ticks to 6.0%, by far the highest outside Atlantic Canada.

Bottom Line: One always has to take care when reading a Canadian employment report—for example, the prior month's huge gain was itself revised down (earlier) by more than 30,000 jobs. Still, even if there are some misgivings about the massive headline gain, the labour market is sending precisely zero signs of economic stress. For the Bank of Canada, the strong report must make them at least a tad nervous about their freshly-minted pause—we said the bar for any move would be very high, but the employment gain is pretty towering indeed. This is actually the last jobs report the Bank will see before it next decides in March, but their upcoming decisions will largely be determined by inflation, and the employment data may prove to be just loud noise, provided inflation continues to ebb.

Table 1 - Canada — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics