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The Canadian Economic Month at a Glance: February 8, 2013

Employment Drops in January, Following Five Months of Gains

The economy lost 21,900 jobs in January, following a string of gains in the second half of 2012. Most of the losses were full-time positions in the public sector. The unemployment rate, however, also fell, dropping to 7 per cent due to a decline in the number of job seekers.

The educational services industry suffered the largest decline, losing 30,900 jobs. Health care and social assistance also lost positions, while public administration saw gains in employment. In the private sector, manufacturing was the worst-hit industry, losing 21,600 jobs. The utilities industry and finance, insurance, real estate, and leasing industry both lost significant numbers of jobs. (Still, employment in the latter is 7.4 per cent higher than it was a year ago.) The professional, scientific, and technical services industry added over 17,000 jobs, as did the construction industry.

Employment was down significantly in both Ontario (–31,200) and British Columbia (–15,900). The losses in Ontario were all in full-time work. British Columbia’s losses brought employment there back down to where it was a year ago. Alberta added jobs, but the unemployment rate held steady, as more people joined the labour force. Saskatchewan experienced the highest growth rate in employment of any province last month—4.1 per cent. Employment in New Brunswick increased, but so did the unemployment rate there, as more people joined the search for work. Employment was unchanged in Quebec, allowing the province to maintain its year-over-year employment gain.

Most of the January losses were full-time positions in the public sector

November was a good month for the Canadian economy. Real gross domestic product edged up 0.3 per cent—a welcome increase after stagnant growth in previous months. The economic boost was widespread, affecting almost every major industry. The goods-producing industries led the way with a 0.6 per cent increase. Meanwhile, the services industries edged up by 0.1 per cent.

Manufacturing contributed the most to November’s economic growth. Primary metal manufacturing and transportation equipment manufacturing were especially strong. Chemical, petroleum, and coal products manufacturing also increased, as did food manufacturing.

Mining and oil and gas extraction made up the second largest contributor to November’s economic expansion. Despite the decline in oil prices, oil and gas extraction grew 0.8 per cent. Potash and diamonds had their best performance in months. Metal and mineral prices increased in November after slumping earlier in the fall, and this resulted in boosts to iron, gold, and silver production.

Wholesale trade was up on the strength of demand for machinery, equipment, and supplies and petroleum products. Retail trade was also up, driven by strong sales at motor vehicles and parts dealers. Meanwhile, clothing retail was down.

The housing market continued its decline in November, with output of real estate agents and brokers decreasing 1.1 per cent. New housing also struggled as housing starts dropped for the fourth consecutive month in December. But the drop in residential construction was offset by increases in the non-residential building and engineering construction sectors.

Also on the negative side, October’s gains in the finance and insurance industry were wiped out in November. Accommodation and food services also experienced a sizable decline in November because of a drop in overnight travellers. Merchandise trade imports were up significantly, widening the trade balance substantially.

GDP edged up 0.3 per cent in November—a welcome increase after a stagnant growth in previous months.

Growth in the consumer price index (CPI) has slowed in recent months. Prices (year-over-year) grew only 0.83 per cent in November and December. Therefore, it came as no surprise when the Bank of Canada decided once again to hold its overnight rate constant at 1 per cent on January 23.1 The Bank pointed to a weaker global economic outlook, a Canadian economic slowdown in the second half of 2012, and softer inflation than expected as key factors in its decision to hold rates constant. It also said the economy’s return to full capacity is expected to be delayed until the second half of 2014. While the Bank acknowledges a withdrawal of monetary policy stimulus will be necessary in the future, these dampening economic factors now suggest this withdrawal will be “less imminent that previously anticipated.”

The pricing environment likely benefited many manufacturers in Canada in 2012, as raw material prices were down while industrial product prices were up. The Industrial Product Price Index increased slightly in 2012 compared with the previous year. Of the 21 major product groups, 17 posted price increases. The largest contributor was the lumber and other wood products group; this was a result partly of stronger domestic demand in the first half of the year, but also of growing demand from China and the United States. Prices for petroleum and coal products were up primarily because of higher gasoline prices. The Raw Materials Price Index (RMPI), on the other hand, was down significantly in 2012. Mineral fuel prices—specifically for crude oil—were by far the main contributors to the decline. Declines in copper, nickel, lead, and zinc concentrate prices also put downward pressure on the RMPI. Only two commodity groups showed positive price growth: animals and animal products, and wood products.

1    Bank of Canada, Bank of Canada Maintains Overnight Rate Target at 1 Per Cent. News release, January 23, 2013.


Canadian Data Released to February 8, 2013


Key Indicators Aug. 12 Sep. 12 Oct. 12 Nov. 12 Dec. 12 Jan. 13
Household Sector
Employment (000s) 17,523 17,568 17,580 17,636 17,668 17,646
Employment change (000s) 39 46 12 56 31 –22
Unemployment rate (per cent) 7.3 7.3 7.4 7.2 7.1 7.0
Wage settlements (total, %) 2.2 0.6 1.4 1.9    
Wage settlements (public, %) 2.4 1.2 1.3 1.8    
Wage settlements (private, %) 1.6 0.1 1.9 3.0    
Average weekly earnings (Y/Y, %) 3.56 3.27 2.51 3.25    
Labour income (Y/Y, %) 4.57 4.26        
Retail sales (%) 0.30 0.16 0.53 0.20    
Consumer Price Index (Y/Y, %) 1.25 1.16 1.16 0.83 0.83  
Motor vehicle sales (units, millions) 1.730 1.723 1.761 1.749    
Housing starts (units, 000s) 228.3 223.6 209.2 201.4 198.0  
Household saving rate   3.9        
Consumer confidence (2002 = 100) 75.6 82.2 81.1 80.3 77.9 83.0
Business Sector
Real GDP at basic prices (%) –0.13 –0.02 0.05 0.28    
Manufacturing shipments (%) 0.74 0.25 –1.25 1.75    
Wholesale sales (%) 0.35 –1.40 0.79 0.73    
Real merch. exports (%) 0.16 –0.49 –0.95 0.36    
Real merch. imports (%) –3.08 2.07 –1.85 2.25    
Merch. trade balance (current $ millions) –14,682 –13,760 –6,630 –23,526    
Industrial product price index (Y/Y, %) –0.17 –0.17 –0.17 –0.61 0.17  
Raw materials price index (Y/Y, %) –4.05 –3.94 –3.16 –8.57 –8.05  
West Texas Int. crude (US$/barrel) 94.16 94.72 89.57 86.66 88.25 94.69
Business confidence (2002 = 100)   92.3     97.5  
Financial Sector
Chtd. bnk. personal loans ($ billions) 424.8 425.4 426.2 427.1 428.7  
Chtd. bnk. business loans ($ billions) 313.9 317.6 319.2 325.9 329.9  
Prime business rate 3.00 3.00 3.00 3.00 3.00 3.00
3-month T-bill rate 1.03 1.00 1.00 0.99 0.98 0.93
5-year mortgage rate 5.24 5.24 5.24 5.24 5.24 5.24
Exchange rate (US$/C$) 1.0079 1.0222 1.0130 1.0030 1.0105 1.0079
U.S.-Cda. 90-day T-bill rate spread 0.93 0.89 0.90 0.90 0.91 0.86
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

Labour markets charts for February 2013

Prices

Wages

Financial Markets

Consumer Markets

Business and Trade

  
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
Forecasting and Analysis

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