Labour market ‘not out of the woods’: report

The Canadian labour market may have topped expectations and steadily added jobs in 2016, but the vast majority were part- time positions and the “meagre” growth in fulltime work was concentrated in industries susceptible to a slowdown, TD Economics says in a new report.

This move toward part- time work suggests the Canadian economy is “not out of the woods” and needs ongoing support, wrote TD economists Beata Caranci and James Marple in the report released Wednesday.

“The sharp rise in part-time work over the past year suggests that the labour market is not as healthy as the headline numbers suggest,” the economists said. “The energy sector was a primary source of weakness in full- time employment demand, but can’t take the rap for the rest of the country. The meagre full- time growth elsewhere was concentrated in a handful of industries that are now vulnerable to a downturn.”

The report, entitled Canada’s Part-Time Conundrum, examined the 2016 jobs data to the end of November ( December data is due to be released by Statistics Canada on Jan. 6). Canada’s latest employment survey showed the unemployment rate dropped to 6.8 per cent in November after the labour market added 19,400 part-time jobs and lost 8,700 full-time posts, raising questions about the quality of jobs.

It is clear oil- producing provinces such as Alberta and Saskatchewan weighed heavily on employment numbers, but even outside of energy- producing provinces fulltime jobs were up a “measly” 0.5 per cent year-on-year, TD says.

A bright spot for full-time work was the real estate sector, with employment in construction and finance making up 75 per cent of the new full- time jobs in non- energyproducing provinces, the report adds. TD sees this as a “cautionary tale,” however. “Higher interest rates, stretched valuations and tighter regulations foretell an inevitable slowdown within this sector,” Caranci and Marple write. “Demand for those full- time jobs will not only slow, but there is the real possibility of some reversal.”

The surge in part- time work could also stem from recent chan- ges to Employment Insurance that allow people to continue receiving benefits while returning to the workforce, TD points out. The effect of Canada’s aging baby boomers switching to part-time could also be a factor, but the decline in labour force participation for older groups tends to offset this, it adds.

Still, it is clear the share of fulltime work has been declining for decades, plunging during the recessions of the early 1980s and 1990s, and again during the 2009 economic downturn. At present, the share of full-time work still sits below the pre-recession level, TD says.

TD expects to see a slower pace of job growth in 2017, with employment increasing by 0.5 per cent through the year.

“It would not take much for fulltime work to make something of a comeback given the low bar set last year,” it says. “But, we suspect the share of part-timers will remain elevated relative to the pre- recession era, implying continued downward pressure on earnings and hours worked.”