On job numbers, the devil is in the data
Bill Morneau couldn’t resist attaching himself to Statistics Canada’s latest hiring numbers, which put the jobless rate at 5.6 per cent in November, the lowest in a data set that dates to 1976. “Under our plan, Canadians have created over 800,000 new jobs,” the finance minister tweeted on Friday. “That’s real progress.” Others chimed in. Mary Ng, the small-business minister; François-Philippe Champagne, the infrastructure minister; and Amarjeet Sohi, the natural resources minister, all made note of the excellent news. “Our plan for jobs, families, and the middle class is working,” Champagne informed his filter bubble. A closer look suggests that Morneau or a member of his staff did some tinkering to come up with that big round number. Justin Trudeau’s government got to work in November 2015, but the finance minister’s count only works if you start in December, which provides a lower base. (Net hiring between November 2015 and last month was about 792,000, according to StatCan’s Labour Force Survey.) But now I’m the one tinkering. The Trudeau government’s record on jobs so far is a good one. Canada’s economy created about 600,000 positions over the first 35 months of Stephen Harper’s mandate, and only about 280,000 during the final three years of his tenure. On this legacy item, Trudeau is winning. Still, if you are reading this online, note that there are links to all those self-congratulatory tweets I mentioned. That’s so those of you who take government accountability seriously can find them when the numbers turn bad. A humbler government would have stayed quiet after reading the Labour Force Survey (LFS), which regularly makes fools of traders, journalists and politicians. As I’ve said before, the LFS is good only for trends; monthly readings should be ignored. I don’t recall the Trudeau cabinet trumpeting the LFS in February, when it showed that 88,000 jobs had vanished the previous month. That reading was an outlier, and so will be the most recent one. Global stock markets didn’t crash this week because traders feel good about the future. The Bank of Canada left interest rates unchanged on Wednesday, in part because it decided the economy was losing momentum. Economists at Royal Bank of Canada predict growth at an annual rate of 1.1 per cent over the final three months of 2018, and Bank of Nova Scotia’s nowcast model was predicting fourth-quarter growth of 1.6 per cent as of Thursday. Canada’s economy is on track to end the year with a whimper, not the roar implied in the latest hiring figures. Business investment plunged in the third quarter, and the central bank determined that persistently weak Canadian oil prices will have a “meaningful impact” on the economy in the months ahead. Stephen Poloz, the governor of the Bank of Canada, told reporters in Toronto on Thursday that there almost certainly will be job losses as a result of the situation in Alberta’s oilpatch. “The tone of the data has not been good,” Poloz said. The new job figures change the tone a little. The increase in new positions more than covered the margin of error, so the results suggest tens of thousands of Canadians joined the salaried classes this fall. The headwinds are getting stronger, but the economy has enough momentum to push through them. But these days, the best signals are buried deeper in the LFS. One is average hourly wages, which were 1.7 per cent higher in November than a year earlier, the sixth-consecutive month that the rate of pay growth slowed. That’s poor. Economic growth has been fairly strong for a couple of years, and the unemployment rate has been comfortably below six per cent for months. Yet employers still don’t feel compelled to increase salaries, suggesting the labour market is weaker than it appears on the surface. Another important gauge is the youth participation rate. All things equal, employers will hire older workers with experience. When they struggle to keep up with orders, they will lower their standards and hire applicants with thinner resumes. In October and November, only about 62.5 per cent of Canadians aged 15 to 24 who want to work had jobs. That’s down from the post-crisis peak of about 65 per cent in 2014, and the lowest since 1998. Like wages, the relative dearth of younger people in the labour pool suggests there still is slack, despite the impressive jobless rate. Higher post-secondary enrolment rates suggest that a greater number of younger people are choosing school over a paycheque. But few economists think that explains all of the drop in participation. There is more competition for digital work from abroad, a greater number of temporary visa holders are competing for the low-skill work for which youth typically qualify, and the retail industry is shrinking, said Armine Yalnizyan, Atkinson fellow on the future of work. The youth participation rate is especially low in Alberta, suggesting the troubles in the oilpatch since prices collapsed in 2014 risk sidelining a generation of workers, said Brendon Bernard, an economist at Indeed, the hiring website. “We are probably going to need a really strong economy to see a meaningful rebound in youth participation,” Bernard told me in an email. Morneau’s plan might be working, but not as well as he and others in the Trudeau government would have you believe.