UNEMPLOYMENT SNAPSHOT
City now matches Toronto as energy sector cuts spending
A glimpse of the economic landscape: joblessness in Calgary is on the way up and in Toronto, it’s on the way down,
One symbol of how the Canadian economic landscape has been dramatically transformed by the oil shock is the unemployment rate in Calgary, the heart of the energy patch, now matches that of Toronto, home to financial services and manufacturing.
It’s the first time in more than 15 years that Calgary’s rate has not been lower than Toronto’s as Alberta’s energy sector has cut spending and jobs in the face of a global oversupply of crude. They’re both at 6.6 per cent, as the Toronto region’s rate has fallen dramatically over the past eight months from 8 per cent, while Calgary’s has climbed from 4.3 per cent, chief economist Doug Porter, at BMO Capital Markets, noted in a report to clients following the release of July’s labour market data.
Toronto, meanwhile, continues to enjoy a real-estate boom, while lower energy costs and a falling dollar make Ontario’s exports more attractive.
Porter’s comments came after Statistics Canada said the national economy created 6,600 net new jobs in July, while unemployment held steady at 6.8 per cent for the sixth month in a row.
Over the past 12 months, the economy has generated 161,000 net new jobs, for a 0.9-per-cent gain, slightly ahead of the previous two years’ performance. The report was better than expected given the economy’s weak performance so far this year. The economy had shrunk for five consecutive months, sparking a debate about whether Canada is in recession.
“Make no mistake, this is not a strong report . . . but it’s also not notably weak,” Porter noted. “While many have been quick to label this year’s economic performance a recession, the job numbers just haven’t backed that up. Still, there’s no denying that Canada has fully lagged the U.S.”
The closely watched jobs report added fuel to the federal election campaign fire, with Conservative Leader Stephen Harper’s opponents using the downturn to attack his record during the first national leaders’ debate Thursday night.
Combined with Canada’s stronger than expected export performance in June, July’s labour market data “points to renewed momentum,” Randall Barlett, a senior economist with TD Bank, wrote. “The boost from the Pan Am Games should help as well.”
But other economists cautioned jobseekers could face more disappointment ahead.
While July’s data “suggest the economy is suffering only a mild recession, the slowdown in private-sector hiring indicates that the economy is losing momentum,” David Madani, economist with Capital Economics, wrote. “With oil prices tumbling again and businesses likely to make deeper cuts in investment, employment prospects appear to be deteriorating.”
July’s employment picture was mixed. Self-employment contributed almost all of the gains, while fulltime jobs shrank. Private sector payrolls fell and youth employment also declined.
By industry, the goods-producing sector saw declines, as construction, manufacturing and resources all fell.
Jobs in finance and hotels and restaurants also fell, suggesting the lower Canadian dollar has yet to produce the expected tourist boom, Porter wrote. The big gainers were professional and technical services, education, public administration and information, and culture and recreation.
Total hours worked fell 0.4 per cent from the previous month. But average hourly wages rose 3.4 per cent from the prior year.
Still, Canada’s labour performance has been tepid by comparison with the U.S., which added another 215,000 jobs in June, according to reports Friday. Unemployment south of the border held steady at 5.3 per cent.
The Canadian dollar is down 11 per cent since the start of the year, briefly dipping below 76 cents U.S. on Friday.
A lower loonie is supposed to spur an export-driven economic recovery. But it’s been taken longer than expected to materialize. The Bank of Canada has twice cut its trendsetting interest rate to 0.5 per cent since the start of the year to offset the impact of the oil price collapse.
On Wednesday, Statistics Canada offered a glimmer of hope when it reported Canada’s trade deficit with the rest of the world shrank to $476 million in June, down from a revised $3.4 billion deficit in May.
Exports rose 6.3 per cent to $44.6 billion, while imports dropped 0.6 per cent to $45.1billion. It was the best month-over-month increase in exports since December 2006, much of it due to higher exports to the U.S., the federal agency said.
July’s labour data isn’t expected to influence the Bank of Canada’s position on interest rates, which could remain on hold until the end of the year, or possibly longer.
But with its U.S. counterpart, the Federal Reserve, set to start hiking its rate possibly as soon as mid-September, the Canadian dollar could remain under pressure, economists said.