The Canadian labour market took a break in January as job creation stalled. Relative to December, employment was virtually unchanged, with the economy adding a mere 2,300 jobs. This small gain was not enough to keep the unemployment rate from edging up 0.1 percentage point to 7.6 per cent. These latest results were not surprising—The Conference Board of Canada’s Help-Wanted Index had pointed to soft job creation in the near term.
Employment in the goods-producing sector as a whole was up 0.2 per cent, with only the construction sector posting a decline (down 1.1 per cent). Jobs continued to be created in manufacturing (up 0.6 per cent), bringing the overall gains in that sector over the last two months to 36,000. While there were substantial gains in some of the service industries, employment in the sector as a whole was down 0.1 per cent.
Aside from Prince Edward Island where employment fell 1.4 per cent, employment was little changed across Canada. Employment in Quebec edged up 0.2 per cent, as the province added 9,500 new jobs. In Ontario employment was down 0.1 per cent. However, because more people there were searching for work last month, the unemployment rate jumped 0.4 percentage points and now sits at 8.1 per cent. Employment in Alberta—the province that posted the highest level of job creation in 2011—was up only 0.1 per cent in January. And the Atlantic provinces, which already have the highest levels of unemployment in Canada, saw more of the same in January. The unemployment rate in Newfoundland and Labrador now stands at 13.5 per cent (up 0.8 percentage points from the previous month), while it is 12.2 per cent in Prince Edward Island (up 1 percentage point). In Nova Scotia, the rate sits at 8.4 per cent, and New Brunswick is at 9.5 per cent. Both rates are well above the national level.
Relative to December, employment was virtually unchanged, with the economy adding a mere 2,300 jobs.
Job losses in the last quarter of 2011 suggested the Canadian economy might be running out of steam. Following a flat performance in October, GDP numbers were disappointing again in November. Gross domestic product edged down 0.1 per cent, led by a 0.6 per cent decline in the goods-producing sector. Most of the weakness in that sector was due to reduced oil and gas extraction, which slipped 2.5 per cent—partly as a result of maintenance shutdowns. Construction and utilities also posted declines. On the bright side, manufacturing continued to show resilience, advancing for a third consecutive month. This time the gain was 0.6 per cent, as producers of machinery and motor vehicles benefited from an increase in foreign demand and a weaker Canadian dollar. The service sector gained 0.1 per cent, offsetting some of the decline in the goods-producing sector. And while wholesale trade fell 0.6 per cent, retail trade rose—also by 0.6 per cent—as it registered its fourth consecutive monthly increase. Even though residential and non-residential construction both declined in November, healthy activity in the existing home resale market led to a 2.2 per cent gain in output for real estate agents and brokers.
Price pressures eased in December 2011, giving Canadians a much-needed break from price hikes. On a monthly basis, the consumer price index (CPI) fell 0.6 per cent. That brought the annual inflation rate to 2.3 per cent, as many factors that drove inflation above 3 per cent earlier in the year proved to be temporary. The biggest declines were recorded in transportation (down 1.9 per cent) and clothing and footwear (down 4.3 per cent). Gasoline prices—which have declined steadily on a monthly basis since June—decreased yet again in December, falling by 3 per cent; and food prices rose just 0.1 per cent. All 10 provinces shared in December’s CPI decline, with the largest declines coming in Nova Scotia (down 1 per cent) and British Columbia (down 0.9 per cent). Core inflation (which excludes the most volatile components, such as energy, fruits, and vegetables) also fell, dropping to 1.9 per cent—or slightly below the Bank of Canada’s 2 per cent target. The latest slowdown in inflation, however, could be short-lived, as it reflects steeper-than-usual holiday discounting and December’s spike in manufacturers’ incentives on vehicles. As well, cheaper gasoline prices might not last, since mounting tensions with Iran threaten to disrupt supplies and send oil prices higher.
Despite the global turbulence, confidence among Canadian business leaders rebounded in the fourth quarter, helped by the resilience of the Canadian banking and housing sectors. After three consecutive quarterly declines, the Conference Board’s Index of Business Confidence gained 6.6 points in the fourth quarter, bringing the index to 99.3. Still, that is 10 points below where it was one year earlier—a reflection of the concerns among business leaders about the state of the domestic economy and the global uncertainty. Among the survey respondents, the balance of opinion regarding the future direction of the Canadian economy remains slightly negative, with more respondents saying that conditions will get worse over the next six months than those who say conditions will improve. At the same time, business leaders are more optimistic about their own companies than they are about the economy as a whole, with 38 per cent of respondents expecting improved profitability over the next six months and only 10 per cent expecting profitability to deteriorate. Furthermore, fewer said they expect their firms’ financial position to worsen, and most indicated a greater willingness to make a major investment.