Slowing Hours and Wages Drain Vigor From Canada’s Job Gain
(Bloomberg) -- Evidence of slack in Canada’s labor market is deepening, even as the country adds jobs.
The number of hours worked fell in August at the fastest pace since the last recession against the same month a year earlier, and pay raises were the slowest in almost two years. Economists said those forces -- along with a rise in the unemployment rate to 7 percent -- are more powerful than the monthly job gain of 26,200 positions that Statistics Canada reported Friday from Ottawa.
Canada’s dollar fell to the lowest in a week after the labor-market weakness mirrored the central bank’s assessment Wednesday that growth prospects have faded. The world’s 10th largest economy has been relying on employment growth to prop up consumer spending and offset falling investment brought on by low oil prices.
“The Canadian job market is simply stuck in a rut,” Doug Porter, chief economist at BMO Capital Markets, said by phone from Toronto. “We can’t really count on consumer spending to keep offsetting softness in the rest of the economy.”
Unemployment has been stuck at about 7 percent since 2013, about a percentage point higher than what was recorded before the last recession in 2009.
The August labor report showed average hourly wages of permanent employees rose 1.6 percent from a year earlier, less than half the March pace of 3.3 percent. Hours worked fell 0.4 percent from a year earlier.
The monthly job gain still leaves average growth over the last six months at about 8,000 and that is “consistent with weakness in the wider economy,” said David Tulk, head of global macro strategy at Toronto-Dominion Bank’s TD Securities unit. Friday’s report meshes with Bank of Canada Governor Stephen Poloz’s view of the economy, Tulk said.
In deciding to hold rates steady this week, central bank policy makers said the export sector showed further signs of losing ground in the first half of the year. Shipments of goods outside the energy industry have been slow even as the U.S. economy gathers steam.
The August job gains didn’t quite make up for the loss of 31,200 positions in July. Canada’s dollar fell 0.7 percent to C$1.3024 per U.S. dollar at 11:19 a.m. Toronto time -- the third straight decline.
The regional pattern of job growth is consistent with an economy struggling with lower commodity prices. Most job gains this year are coming from British Columbia, Ontario and Quebec, whose economies are based more on services and manufacturing.
Those increases suggest the job market will keep making a contribution to the wider economy this year, with the risk that momentum will fade after that, according to Frances Donald, senior economist at Manulife Asset Management in Toronto. “The Canadian consumer is only an interim support,” she said by phone.
There was one good piece of news outside the raw numbers. Statistics Canada said it was able to restore the job survey in Alberta’s Wood Buffalo region in August -- a return to normalcy after wildfires forced a halt to that work earlier this year.