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Canada's Labour Market Took a Pause in April

May 05, 2017

The Conference Board of Canada’s Matthew Stewart offers the following perspectives/insights:

Quote

“While the labour market took a pause, the economy has still generated an impressive amount of jobs in the last several months. This will continue to support strong consumer spending over the next year. However, the trade sector continues to underperform. In addition, the lack of business capital spending in recent years suggests the slack in the Canadian economy is being rapidly absorbed. Given this situation, the Bank of Canada will likely have to begin raising rates in 2018,”

Matthew Stewart
Associate Director
National Forecast

Insights

  • After several months of strong job gains, the labour market took a pause in April. 
  • Overall, employment saw little change. However, the number of full-time positions fell by 31,000 offset by an increase in part-time jobs.
  • The public sector saw a large increase in employment, continuing a trend seen over the last year. This is likely the result of increased funding from the federal government’s infrastructure plan. Private sector employment fell by 50,000 positions.
  • Despite April’s weak showing, the economy still generated 276,000 new positions in the last 12 months, most of which were full-time jobs.
  • The unemployment rate dropped to 6.5 per cent as fewer people looked for work. This was the lowest rate since October 2008.
  • Solid gains in employment over the last year haven’t translated into wage growth. Year-over-year wage growth is running at just 0.4 per cent. With overall inflation expected to increase above 2.0 per cent this year, wages are declining in real terms.
  • The story is not great news on the trade front either. March’s trade release showed that outside of energy, real merchandise exports have fallen by 1.9 per over the last year. The weak performance on the trade side is especially disappointing, given the low value of the loonie and a U.S. economy that is performing well. There is also a risk that increased protectionist policies south of the border could worsen this trend as the year progresses.
  • The main challenge facing the Canadian economy remains the lack of business investment. Without a material improvement on this front, the Canada’s potential economic growth will remain below 1 per cent. The implication of weak potential growth is that the Bank of Canada may have to begin increasing interest rates sooner than expected as excess slack dissipates early next year.

 


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Senior Vice-President and Chief Economist

Craig Alexander brings over 19 years of experience in the private sector as an economic and financial forecaster to the position of Senior Vice President and Chief Economist. He oversees the Board’s macro-economic outlook products, custom economic and tourism research.

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