On job num­bers, the devil is in the data

Montreal Gazette - - CITY - KEVIN CARMICHAEL Fi­nan­cial Post [email protected]­media.com

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.

RYAN REMIORZ/THE CANA­DIAN PRESS

Fi­nance Minister Bill Morneau is pro­mot­ing rosy hir­ing fig­ures, how­ever wage growth and the youth par­tic­i­pa­tion rate in the labour force are an­other story, says Kevin Carmichael.

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