National Post

Jobs indicator points to deep cracks in labour market nd

Less robust than labour force survey suggests

- JAY ZHAO-MURRAY

IT GETS INTERESTIN­G WHEN YOU START TO SEE A LITTLE BIT OF A GAP OPENING UP BETWEEN THE TWO ... THE SAFEST THING YOU CAN DO IS BET ON PAYROLLS, IN TERMS OF GIVING YOU LEADING INFORMATIO­N ABOUT WHAT’S GOING ON.

— FRED DEMERS, BMO ASSET MANAGEMENT

Canada’s job market is less robust than the country’s most closely watched employment indicator suggests.

Data from the payroll employment survey — a census of all paid workers in Canada — indicates the country added a mere 17,000 jobs over the six-month period ending in February. That’s a far cry from the 183,800 reported in the labour force survey, which polls households and is faster to publish results.

That difference of 166,800 jobs is more than 22 times the average gap between the two surveys since 2001, and has been growing for months.

During the height of the pandemic, six-month job growth in the household survey exceeded payroll growth by more than 700,000. But that gap now approaches its highest level recorded before 2020, which was 186,100 in 2012.

The payroll survey relies on administra­tive data reported by businesses for tax purposes. It’s a direct input to the calculatio­n of Canada’s gross domestic product.

The labour force survey, on the other hand, polls about 56,000 households monthly, allowing it to provide an earlier indicator of the pulse of the job market and capture geographic­al and socioecono­mic difference­s. It posted new data for March three weeks ago that showed the country lost 2,200 jobs that month.

A key difference between the two is that the payroll survey does not include self-employed Canadians, who drove February’s 40,700 job gain captured by the household survey.

Thursday’s payroll data points in the opposite direction, recording a 17,700 job loss for that month.

In general, the two surveys don’t disagree much, Fred Demers, an investment strategist at BMO Asset Management, said.

“It gets interestin­g when you start to see a little bit of a gap opening up between the two, and then the safest thing you can do is bet on payrolls, in terms of giving you leading informatio­n about what’s going on,” he said.

While the household survey’s increase in unemployme­nt has been driven by a growing population rather than job losses, payrolls suggest those losses may soon appear in the household data, Demers said.

Self-employment and the intrinsic noise from the household survey’s small sample size may be reasons for the growing gap, he added.

Dominique Lapointe, director of macro strategy at Manulife Investment Management, agreed that the two surveys tend to track closely in the long run.

He also agreed that the household survey has converged toward payrolls in recent years, but cautioned that month-to-month volatility in the latter has been higher since the pandemic, making it harder to tell if it’s still more reliable.

Lapointe noted that job growth in services has been faster in payrolls than the household numbers.

“What might be happening since the middle of 2023 is services sectors in the labour force survey catching up to what is reflected in the payroll survey, especially in industries such as health care, education and public administra­tion, which continue to see rapid hiring,” he said in an email.

“What remains concerning is the lack of net private hiring since the middle of 2023 as the labour force continues to grow at a rapid pace.”

The growing divergence between strength in the public sector and weakness in the private sector is at least one area where both surveys agree.

While the household survey has shown a gradually rising unemployme­nt rate and even a small surprise contractio­n in March, Thursday’s payroll numbers back the idea that the Bank of Canada risks keeping its policy rate too restrictiv­e for too long, a concern highlighte­d by some officials in the most recent summary of deliberati­ons.

Both headline and core inflation are now within the Bank of Canada’s one per cent to three per cent tolerance band, and retail sales are on track for no growth in the first quarter. That said, gross domestic product growth still looks strong, supported by exports and a population surge.

Policymake­rs next set rates on June 5. The majority of economists in a Bloomberg survey expect the bank to cut policy rates by 25 basis points at that meeting.

WHAT REMAINS CONCERNING IS THE LACK OF NET PRIVATE HIRING SINCE THE MIDDLE OF 2023.

 ?? COLE BURSTON / BLOOMBERG FILES ?? Payroll employment survey data indicates Canada added 17,000 jobs over the six-month period ending in February, as opposed to the 183,800 reported in the labour force survey.
COLE BURSTON / BLOOMBERG FILES Payroll employment survey data indicates Canada added 17,000 jobs over the six-month period ending in February, as opposed to the 183,800 reported in the labour force survey.

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