Un­em­ploy­ment rate down to 40-year low

Improvements hide key piece of data: weak­en­ing wage growth

Toronto Star - - STAR BUSINESS JOURNAL - ANDY BLATCHFORD THE CANA­DIAN PRESS

OT­TAWA— A blast of new jobs last month knocked the coun­try’s un­em­ploy­ment rate down to its low­est level since Statis­tics Canada started mea­sur­ing com­pa­ra­ble data more than 40 years ago — but de­spite eye-catch­ing progress, Fri­day’s num­bers also de­liv­ered dis­ap­point­ment.

Canada added 94,100 net jobs for its largest monthly in­crease since March 2012 when there was a gain of 94,000 jobs, Statis­tics Canada said in its labour force sur­vey. The Novem­ber surge was fu­elled by other pos­i­tives: 89,900 new full-time po­si­tions and 78,600 em­ployee jobs in the pri­vate sec­tor.

The job­less rate fell to 5.6 per cent last month from Oc­to­ber’s read­ing of 5.8 per cent, which had been the pre­vi­ous low mark since com­pa­ra­ble data first be­came avail­able in1976. The old sta­tis­ti­cal ap­proach — prior to1976 — reg­is­tered an un­em­ploy­ment rate read­ing of 5.4 per cent in 1974. The improvements, how­ever, ob­scured a key piece of data: weak­en­ing wage growth.

Year-over-year av­er­age hourly wage growth for per­ma­nent em­ploy­ees con­tin­ued its de­cline in Novem­ber to 1.46 per cent — its low­est read­ing since July 2017. “There’s no ques­tion that the head­line job growth is gang­busters strong,” said Frances Don­ald, head of macroe­co­nomic strat­egy at Man­ulife As­set

Man­age­ment. “I would cau­tion us against cel­e­brat­ing too quickly, how­ever, be­cause wage growth is de­cel­er­at­ing sharply,” Don­ald said.

Ex­perts have been ex­pect­ing wage growth to pick up its pace, thanks to the tight­ened labour mar­ket. But the op­po­site has been hap­pen­ing — wage growth has dropped ev­ery month since its May peak of 3.9 per cent and now sits well be­low in­fla­tion.

The Bank of Canada keeps a close watch on wages ahead of its in­ter­est-rate de­ci­sions.

The cen­tral bank has raised the rate five times since the sum­mer of 2017 in re­sponse to Canada’s strong eco­nomic per­for­mance. Gover­nor Stephen Poloz has sig­nalled that more in­creases will be needed to keep in­fla­tion from ris­ing too high.

On Wed­nes­day, how­ever, Po- loz held the benchmark rate at 1.75 per cent. In ex­plain­ing the de­ci­sion, he high­lighted other eco­nomic neg­a­tives such as weaker-than-ex­pected busi- ness in­vest­ment and the steep slide in oil prices. The bank’s next rate an­nounce­ment will be Jan. 9. Don­ald ex­pects the bank to re­main fo­cused on oil prices, the ca­pac­ity of the en­ergy sec­tor to en­gage in busi­ness in­vest­ment and the abil­ity of Cana­di­ans — many of whom are car­ry­ing very high debt loads — to man­age higher in­ter­est rates.

“Cana­di­ans need more wage growth to off­set higher in­ter­est rates,” she said.

“If we’re see­ing wage growth that can’t even keep up with the pace of in­fla­tion, it makes it much more dif­fi­cult for house­holds to ab­sorb the Bank of Canada’s de­sire to lift rates higher from this point for­ward.”

Poloz, she added, will be more con­cerned about the slow­down in wages rather than op­ti­mistic about the over­all job gain, par­tic­u­larly since it could af­fect the pace at which he will lift rates. Royce Mendes of CIBC Eco­nomics said the Bank of Canada will take no­tice of the “mas­sive read­ing” in the Novem­ber jobs re­port as it mulls next month’s rate de­ci­sion.

By re­gion, em­ploy­ment rose in six prov­inces and was led by gains in Que­bec and Al­berta.

DAR­RYL DYCK THE CANA­DIAN PRESS FILE PHOTO

The over­all jobs num­ber marked the monthly labour force sur­vey’s largest in­crease since March 2012.

JONATHAN HAY­WARD THE CANA­DIAN PRESS FILE PHOTO

Work­ers are pic­tured at the Van­cou­ver Ship­yard. Statis­tics Canada says the coun­try gained 63,000 jobs in Septem­ber, edg­ing the un­em­ploy­ment rate lower to 5.9 per cent.

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