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The Canadian Economic Month at a Glance: January 4, 2013

Labour Markets Show Continued Strength

Labour markets continued to strengthen in December as the economy added 40,000 jobs. And for the second consecutive month, all the gains were in full-time positions in the private sector. The unemployment rate dropped to 7.1 per cent—the lowest since December 2008.

Compared with a year earlier, employment was up by 312,000 (with all of those gains coming in full-time positions). In 2012, the job gains were shared evenly among all age groups with the exception of youth, where employment showed little improvement. The unemployment rate among those aged 15 to 24 has hovered around 14 per cent for the past year; in December, it stood at 14.1 per cent.

The December job gains were concentrated mainly in the transportation and warehousing and the construction industries. However, the strong gains in these industries last month only offset earlier losses, bringing employment levels there back to where they were a year ago. There were significant job losses in the professional, scientific, and technical services industry in December. Public administration also experienced losses. Losses in both of these services industries contributed to their employment levels being much lower than a year earlier.

The unemployment rate dropped to 7.1 per cent—the lowest since December 2008.

Five provinces—Ontario, Manitoba, Saskatchewan, Newfoundland and Labrador, and Prince Edward Island—saw job growth in December. Small employment declines were experienced in Nova Scotia, New Brunswick, and Alberta. (Although Alberta’s unemployment rate rose from 4.2 per cent to 4.5 per cent, the province still enjoys the lowest rate in Canada.) In Quebec and British Columbia, employment was little changed. And in the North, employment in the three territories was little changed in the fourth quarter compared with a year earlier.1

Economic activity got off to a slow start in the fourth quarter of 2012. October’s GDP was up only 0.1 per cent from the previous month as the economy struggled to find its footing. Overall, economic activity in October was lower than it was in July.

The goods-producing industries have struggled in recent months, and October was no exception. The manufacturing industry has been declining since July, and it dropped another 0.4 per cent in October. The declines were widespread across the industry’s products—from food (due to the XL plant closure in Alberta) and machinery to chemicals and plastics manufacturing. The construction industry has shown no improvement since June, and residential and non-residential construction both declined in October. On the brighter side, the mining, oil, and gas extraction industry, which had been on a decline since April, finally showed some improvement in October, expanding 0.3 per cent. The increase was led by crude petroleum production and natural gas extraction. Metallic mineral mining was up as copper, nickel, lead, zinc, gold, and silver production increased. However, a decline in coal production outweighed the gains in metals. The utilities industry edged up 1.2 per cent, following two months of declines.

October’s GDP was up only 0.1 per cent from the previous month as the economy struggled to find its footing.

The services-producing sector eked out growth of 0.1 per cent in October, with wholesale and retail trade leading the way. The wholesaling of farm products, food, and motor vehicles and parts was up. Retail sales at motor vehicle and parts dealers were also up, as were sales at gas stations and at clothing and food and beverage retailers. The arts, entertainment, and recreation industry has been declining since June, and it posted a large drop in October (due at least partly to the NHL lockout). As well, transportation activity was down due to a drop in rail and truck transportation, support activities, and pipeline transportation.

Inflationary pressures remain subdued. November’s consumer price index was up only 0.8 per cent from a year earlier. And on a seasonally adjusted basis, the consumer price index actually declined in November.

Despite low interest rates, the housing market continued to slide in November, with housing starts down for a third consecutive month. At only 196,125 units,2 November starts were the lowest in a year. The November drop was due to declines in single-detached and multiple-unit construction in Ontario and British Columbia. The condo market in particular is in a slump, and pre-sales have slid. The resale market is no better off. The Canadian Real Estate Association has downgraded its 2012 sales projections and now expects the numbers to show that sales dropped half a per cent last year. A further decline of 2 per cent is expected in 2013. The Conference Board of Canada’s consumer confidence index was down for a third consecutive month in December, suggesting that potential buyers are likely to hold off when it comes to purchasing homes. However, low interest rates continue to entice some consumers to buy—vehicle purchases increased significantly in October.

1  Labour Force Survey data are unadjusted for seasonality in the territories, so only year-over-year comparisons can be made.

2  Seasonally adjusted annualized rates.


Canadian Data Released to January 4, 2013


Key Indicators Jul. 12 Aug. 12 Sep. 12 Oct. 12 Nov. 12 Dec. 12
Household Sector
Employment (000s) 17,479 17,514 17,566 17,568 17,627 17,667
Employment change (000s) –30 34 52 2 59 40
Unemployment rate (per cent) 7.3 7.3 7.4 7.4 7.2 7.1
Wage settlements (total, %) 0.9 2.2 0.6 1.4    
Wage settlements (public, %) 0.8 2.4 1.2 1.3    
Wage settlements (private, %) 1.4 1.6 0.1 1.9    
Average weekly earnings (Y/Y, %) 3.75 3.56 3.27 2.82    
Labour income (Y/Y, %) 4.52 4.57 4.26      
Retail sales (%) 0.70 0.28 0.20 0.73    
Consumer Price Index (Y/Y, %) 1.25 1.25 1.16 1.16 0.83  
Motor vehicle sales (units, millions) 1.659 1.729 1.721 1.758    
Housing starts (units, 000s) 213.6 228.5 223.4 203.5 196.1  
Household saving rate     3.9      
Consumer confidence (2002 = 100) 76.9 75.6 82.2 81.1 80.3 77.9
Business Sector
Real GDP at basic prices (%) 0.16 –0.14 –0.04 0.10    
Manufacturing shipments (%) –0.60 0.66 0.03 –1.37    
Wholesale sales (%) –0.92 0.31 –1.48 0.87    
Real merch. exports (%) –3.12 0.17 –0.40 0.24    
Real merch. imports (%) 0.53 –3.00 1.86 –1.79    
Merch. trade balance (current $ millions) –32,467 –14,058 –12,169 –2,028    
Industrial product price index (Y/Y, %) 0.35 –0.26 –0.26 –0.17    
Raw materials price index (Y/Y, %) –10.06 –3.88 –3.88 –2.81    
West Texas Int. crude (US$/barrel) 87.93 94.16 94.72 89.57 86.66 88.25
Business confidence (2002 = 100)     92.3      
Financial Sector
Chtd. bnk. personal loans ($ billions) 407.6 410.7 411.3 412.0 412.7  
Chtd. bnk. business loans ($ billions) 308.5 314.4 318.2 320.0 326.7  
Prime business rate 3.00 3.00 3.00 3.00 3.00 3.00
3-month T-bill rate 0.97 1.03 1.00 1.00 0.99 0.98
5-year mortgage rate 5.24 5.24 5.24 5.24 5.24 5.24
Exchange rate (US$/C$) 0.9863 1.0079 1.0222 1.0130 1.0030 1.0105
U.S.-Cda. 90-day T-bill rate spread 0.87 0.93 0.89 0.90 0.90  
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.

Labour Markets

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Prices

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Wages

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Financial Markets

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Consumer Markets

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Business and Trade

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Sources: The Conference Board of Canada; Statistics Canada; CMHC Housing Time Series Database.

Disclaimer: 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.

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Jacqueline Palladini
Economist
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