Canadian growth looks patchy despite gains in employment
Many new jobs are part time, as ‘still-damp’ exports crimp optimism
If there’s a pattern developing in Canada’s economy, it looks more patchwork than anything by design.
While we have seen three consecutive monthly gains in employment, many of the jobs have been part-time positions that could fall off at any time. And despite some bright spots in the overall trade outlook, exports still appear raggedy.
Friday’s figures for both sectors fit the scenario of slow, unsteady growth. That’s something the federal government — now on a stimulus spree — and the Bank of Canada — still offering ultracheap credit — hope could soon be on the mend.
“While we could quibble about the quality of the jobs gains, the reality is that the country just knocked down three solid monthly gains in a row for overall employment, and that’s much better than anyone could have expected,” noted Douglas Porter, chief economist at BMO Capital Markets.
“Does this change the outlook for the Bank of Canada? Not in a material way, although the three-month string of job growth will offset the sting of still-damp exports.”
On the surface, data from Statistics Canada showed a strong and unexpected jump in hiring during October — adding a net 43,900 jobs, coming after a 67,200 increase in September and 26,200 new employees in August.
The positive jobs numbers — the first such back-to-back gains in a year — however, did not budge the unemployment rate away from seven per cent, where it has remained for three months. The last time the economy strung together three straight monthly increases in the labour force was between August and October 2015.
Still, most of last month’s rise was generated by a 67,100 addition in part-time positions, while full-time employment declined by 23,100, the federal data agency said.
Economists had expected the labour force to lose anywhere from 10,000 to 15,000 jobs in October, but with the unemployment rate remaining unchanged or only slightly weaker.
Meanwhile, Canada’s trade performance leaves many analysts scratching their heads and — like central bank governor Stephen Poloz — wondering when the so-called “Great Rotation” from a consumer-driven economy to one led by exports, a sector that was supposed to benefit from the weak domestic currency.
Statistics Canada reported Friday that the country piled up a trade deficit of $4.1 billion in September, the 25th shortfall in a row and dwarfing the $1.7-billion number that many forecasters had expected.
Imports rose 4.7 per cent during the month, while exports were limited to a meagre 0.1-percent gain, the data agency said. Shipments to the United States — Canada’s largest customer — were down 0.6 per cent in September, at the same time that imports fell 1.1 per cent.
“Looking past the month-tomonth choppiness, Canadian exports showed some signs of strengthening in the third quarter after a disappointing first half of the year,” said Fotios Raptis, at TD Economics.
“Nevertheless, (the) Canadian exports performance is likely to continue to disappoint despite the past depreciation in the Canadian dollar.”
The economy as a whole is also troubling for many business leaders, specifically concern over the lingering effect of the still-low oil prices — along with uncertainty about U.S. growth and Tuesday’s presidential election.
According to a third-quarter survey released Friday by Chartered Professional Accountants of Canada, more than a quarter of respondents were pessimistic about the domestic economy over the next 12 months. Only 36 per cent of about 550 respondents said they anticipated employment growth at their companies.
“The upcoming U.S. election and the protectionist trade winds associated with it are likely factors contributing to doubt or hesitation here in Canada,” said Joy Thomas, president and CEO of CPA Canada.
“Not only is the future unclear regarding trade policies with the U.S. but there are other challenges including Canada’s transition to a low-carbon economy and possible ramifications from the Brexit vote.”
Canadian exports performance is likely to continue to disappoint despite the past depreciation in the Canadian dollar.