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The Canadian Month at a Glance: January 6, 2012

Canada’s Job Market Ends Year on a Positive Note

by Ksenia Bushmeneva

Canada’s labour market ended the year on a positive note, adding 18,000 jobs in December. The gain followed two disappointing months of declines, and it brought employment growth for 2011 as a whole to 1.2 per cent. Despite the December gain, the unemployment rate edged up 0.1 percentage points to 7.5 per cent, as more people entered the labour force in search of jobs.

Casting a shadow on the overall picture is the fact that all the December gains were in part-time employment. The economy added 43,000 part-time positions, while losing 26,000 full-time jobs. New jobs were concentrated in the goods-producing industries, where employment was up 0.5 per cent. The manufacturing sector posted a healthy gain (up 30,400), but there were declines in utilities and construction. And even though manufacturing added jobs this month, it still finished the year down 50,000 jobs. A mixed performance in the service sector resulted in little overall change in employment there.

Canada’s labour market ended the year on a positive note, adding 18,000 jobs in December.

With the exception of Alberta and Quebec, all Canadian provinces added jobs in December. Employment in Quebec decreased for the third consecutive month (down 26,000), bringing its unemployment rate up to 8.7 per cent—well above the national average. Employment in Alberta was little changed in December. However, Alberta still managed to post a 4.9 per cent increase in employment for the year as a whole, making it the leader in job growth among the provinces. On an annual basis, the number of private sector employees rose 1.3 per cent, while the number of public sector workers was unchanged—a result of the ongoing deficit-reduction measures by the federal government.

The global economic jitters have finally taken a toll on Canada’s economy, which stalled in October after four consecutive months of expansion. The news from Statistics Canada was not surprising, given that we saw a loss of 54,000 jobs in October. A 0.2 per cent month-over-month decline in output in the goods-producing sector was offset by an equivalent gain in the service sector, leaving GDP unchanged from September. In the goods-producing sector, the weakness was led by a 1.5 per cent output drop in utilities due to lower demand for electricity and natural gas. Decreases were also registered in construction and mining, while manufacturing and the primary sector posted gains. In the service sector, notable gains were recorded in retail trade (up 0.6 per cent) and finance, insurance, and real estate (up 0.3 per cent). Retail trade grew for the third consecutive month, thanks to increased sales of motor vehicle and parts, food and beverages, and health and personal care items. Wholesale trade, however, declined 0.3 per cent in October, weighed down by reduced demand for personal and household goods as well as for petroleum products.

There was little change in the consumer price index in November. On a monthly basis, the index edged up 0.1 per cent, leaving the year-over-year inflation rate unchanged from October at 2.9 per cent. Recent easing in inflationary pressures is of little consolation to consumers, as food and transportation costs continue to soar. Aside from Alberta and Ontario, all provinces saw price hikes in November. The largest increases were recorded in Newfoundland and Labrador (up 0.7 per cent) and New Brunswick (up 0.4 per cent). Prices declined 0.5 per cent in Alberta and remained unchanged in Ontario. The core inflation rate (which excludes the most volatile components, such as energy, fruits, and vegetables) remained unchanged from October at 2.1 per cent, landing close to the Bank of Canada’s 2 per cent target. Given the downside risks to the Canadian economy and that core inflation remains stable, the Bank of Canada, in its December rate announcement, maintained the overnight interest rate at 1 per cent.

Retail sales remained strong, fuelled by growing consumer willingness to take on debt.

The Index of Consumer Confidence plunged 6.5 points in December, and now sits at 69.9—its lowest level in more than two and a half years. While the balance of opinion deteriorated on all four questions on which the index is based, responses regarding the major purchases were particularly sour. Respondents remain wary regarding spending on big-ticket items, such as a car, a home, or a major appliance. As well, they were significantly more pessimistic about their personal finances than at the same time last year. This year, wage gains have failed to keep up with inflation. On a year-over-year basis as of October, average weekly earnings had increased 2.7 per cent, below the 2.9 per cent inflation rate—meaning that the average income in Canada actually decreased in real terms over that period. Despite this, consumers have not scaled back their spending. Retail sales remained strong, fuelled by growing consumer willingness to take on debt. The ratio of consumer credit and mortgage liabilities to personal disposable income is now at 139.7 per cent, an increase of 16 per cent since the onset of monetary easing by the Bank of Canada. Credit card debt alone is up 9 per cent on a year-over-year basis, and that has prompted Bank of Canada Governor Mark Carney to express concern over the growing indebtedness of Canadians.

Canadian Data Released to January 6, 2012

Key Indicators Jul. 11 Aug. 11 Sep. 11 Oct. 11 Nov. 11 Dec. 11
Household Sector
Employment (000s) 17,344 17,339 17,400 17,346 17,327 17,345
Employment change (000s) 7 –6 61 –54 –19 18
Unemployment rate (per cent) 7.2 7.3 7.1 7.3 7.4 7.5
Wage settlements (total, %) 1.7 1.9 2.3 1.5    
Wage settlements (public, %) 1.7 1.7 2.4 1.2    
Wage settlements (private, %) 1.6 2.2 2.1 2.5    
Average weekly earnings (Y/Y, %) 1.95 1.67 1.11 2.68    
Labour income (Y/Y, %) 4.26 4.56 4.07      
Retail sales (%) –0.48 0.61 1.01 0.97    
Consumer Price Index (Y/Y, %) 2.74 3.08 3.17 2.90 2.89  
Motor vehicle sales (units, millions) 1.596 1.593 1.621 1.675    
Housing starts (units, 000s) 213.2 191.5 208.5 208.8 181.2  
Personal savings rate   3.5      
Consumer attitudes (2002 = 100) 81.3 74.7 75.0 71.8 76.4 69.9
Business Sector
Real GDP at basic prices (%) 0.44 0.44 0.24 0.04    
Manufacturing shipments (%) 3.17 1.30 2.59 –0.80    
Wholesale sales (%) 1.09 0.30 0.45 0.91    
Real merch. exports (%) 4.69 –0.31 0.17 –1.36    
Real merch. imports (%) –0.36 0.13 –2.68 1.33    
Merch. trade balance (current $ millions) –1,610 –5,411 12,317 –10,614    
Industrial product price index (Y/Y, %) 5.16 5.23 5.39 4.73    
Raw materials price index (Y/Y, %) 19.58 13.24 15.14 11.29    
West Texas Int. crude (US$/barrel) 97.19 86.33 85.61 86.41 97.21 98.12
Business confidence (2002 = 100)     92.6      
Financial Sector
Chtd. bnk. personal loans ($ billions) 376.2 377.5 378.1 378.2 400.0  
Chtd. bnk. business loans ($ billions) 303.4 303.2 301.2 300.3 299.9  
Prime business rate 3.00 3.00 3.00 3.00 3.00 3.00
3-month T-bill rate 0.93 0.93 0.87 0.87 0.89 0.83
5-year mortgage rate 5.39 5.39 5.19 5.29 5.29 5.29
Exchange rate (US$/C$) 1.0468 1.0175 0.9974 0.9806 0.9748 0.9768
U.S.-Cda. 90-day T-bill rate spread 0.89 0.91 0.86 0.85 0.88  
All data are seasonally adjusted to annual rates, excluding interest rates and prices.
Percentage changes (%) are month-to-month with the exception of those designated year-over-year (Y/Y).
Wage settlements represent average annual percentage increase in base rates over first year of contract.
Total settlements exclude COLA.
Sources: The Conference Board of Canada; Statistics Canada; CMHC Housing Time Series Database.

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Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice.
Sources: The Conference Board of Canada; Statistics Canada; CMHC Housing Time Series Database.

Ksenia Bushmeneva Ksenia Bushmeneva
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