Red-hot jobs market boosts economy amid exports slump
Spike in new positions cuts jobless rate to one of lowest readings ever: StatsCan
O T TAWA Canada’s economy is showing unexpected resiliency as the year ends with the strongest job market in a decade offsetting slumping exports.
A sharp rise in new positions cut the jobless rate to 5.9 per cent in November, Statistics Canada said Friday, one of the lowest readings ever in the past four decades and the first time the rate has fallen below six per cent since 2008. Employers added 79,500 workers during the month, bringing gains over the past 12 months to nearly 400,000.
Increased employment, meanwhile, is helping to fuel household spending, a separate report showed, with consumption rising at the fastest pace since before the recession over the previous two quarters. That helped to temper a sharp drop in exports that slowed third-quarter growth to an annualized 1.7 per cent.
The data indicates an expected slowdown for Canada’s economy in coming quarters may be less severe than anticipated and slack in the labour market is diminishing more rapidly, raising the prospect of faster interest rate increases by the Bank of Canada. The Canadian dollar jumped as much as 1.5 per cent on the reports.
“Our forecast assumes the bank will raise rates again in April when they have more information on NAFTA renegotiation and how households are handling this year’s rate hikes,” said Josh Nye, an economist at Royal Bank of Canada. “If anything, today’s blockbuster employment report raises the risk of an earlier move.”
Both the employment gain and jobless figure in November beat the consensus economist forecasts for a 6.2 per cent unemployment rate and 10,000 new jobs. Thirdquarter gross domestic product growth was also slightly higher than the 1.6 per cent rate forecast by economists but below the Bank of Canada’s October forecast for a 1.8 per cent increase.
The employment gain for November is the 12th straight, the longest since a 14-month span that ended in March 2007. The 0.4 percentage point drop in the unemployment rate was the largest one-month decline since 2005.
Household spending has carried the country’s economy for much of the decade since the 2008-2009 recession, particularly in the two years following the collapse of oil prices in 2014 when it accounted for just about all of Canada’s economic growth. It continues to defy expectations of a slowdown, just as it did in the third quarter when it increased by an annualized four per cent versus estimates for below three-per-cent growth. Statistics Canada also revised up secondquarter consumption growth to five per cent. That’s the best two-quarter gain since before the recession.
The stronger consumption growth offset a sharp decline in exports, which plunged an annualized 10.2 per cent in the third quarter, subtracting 3.4 percentage points from the growth rate.
The spending is being fuelled by a buoyant jobs market that is driving incomes. Compensation of employees rose an annualized 1.3 per cent in nominal terms in the third quarter, the strongest growth since 2014, the GDP report showed.
Average hourly earnings — a closely monitored indicator of tightness in the labour market — rose 2.8 per cent in November from a year ago, the fastest since April 2016.
Employment grew across most industries, with manufacturing employment increasing by 30,400 in November and the retail and wholesale category climbing by 38,800.
The report poses a dilemma for Bank of Canada governor Stephen Poloz, who has indicated he’ll be cautious on raising interest rates. The gains, particularly faster wage growth, could be signalling even less capacity than thought only a few weeks ago. At the same time, the job gains could bolster his belief that more workers could be drawn into the labour force, allowing the economy to grow longer without fuelling inflation. The central bank’s next rate decision is Wednesday.