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The Canadian Economic Month at a Glance: January 9, 2015

Canada Awaits Impact of Oil Price Slide

On the surface, the latest job report seems pretty run of the mill with employment staying virtually unchanged in December and the national unemployment rate holding steady at 6.6 per cent. However, a closer look shows a surge in full-time work, which was offset by a drop in part-time jobs. So, while there was little change in the total number of jobs, the quality of those jobs improved. Overall, December saw the number of full-time jobs rise by nearly 54,000, while part-time jobs fell by 58,000. The trend toward more full-time jobs continued throughout 2014. And for the year as a whole, all of the net job gains came from full-time work. Additionally, more than 70 per cent of the gains last year were in public or private institutions, as opposed to the self-employed category—another good sign for Canadians looking for higher-quality jobs.

Young people aged 15 to 24 accounted for the majority of the full-time gains and an equal number of losses in part-time work in December. While the unemployment rate for young people worsened (due to more young workers entering the labour force), it is encouraging to see more full-time jobs for this age cohort—a cohort that typically suffers from underemployment, with many young people able to find only part-time work upon graduation from school.

Young people aged 15 to 24 accounted for the majority of the full‑time gains.

After stumbling in July and August, the Canadian economy returned to solid growth in September and October, with month-over-month GDP gains of 0.4 per cent and 0.3 per cent, respectively. The gains were led by the mining sector and by educational services, which returned to normal levels after the three-month-long strike by B.C.’s 41,000 teachers came to an end in September. Overall, the prospects for the Canadian economy remain bright. Canada’s trade sector is on solid ground, thanks to solid U.S. growth and a weaker Canadian dollar (which has dropped below 85 cents U.S. to start 2015, marking the lowest point for the dollar in more than five years). And we expect the numbers to show that the economy continued to grow over the final two months of 2014, which bodes well for the Canadian economy over the near term.

The biggest story for the economy over the last few months has been oil prices. The West Texas Intermediate benchmark price for crude has plunged, dropping below $50 a barrel this past week. That’s less than half the price it was at just six months ago. This drop continues to presents risks—both upside and downside—to the Canadian economy. On one hand, the lower oil prices, particularly if they continue to fall,1 will cause headaches for oil companies, threatening their bottom lines and discouraging future investment in the industry. On the other hand, the drop in prices should boost consumer spending as Canadians’ pocketbooks benefit from lower prices at the pump. This may already be the case. Our December survey of consumer confidence showed a big jump in the share of respondents who said their financial situation had improved over the past six months. And it also found that more respondents believe that now is a good time to make a major purchase—which also bodes well for consumer spending.

Going forward, Alberta is certain to suffer, especially on the employment front, from the drop in oil prices—and it is likely to slip into recession.

One province that is particularly concerned about the recent plunge in oil prices is Alberta. When prices dropped to such low levels during the last recession, engineering investment in the province nosedived by about $18 billion, some 30,000 jobs in Alberta’s mining sector disappeared, and housing starts fell 75 per cent. A similar (but not quite as severe) drop in investment, jobs, and housing starts could be in store for the province if prices fail to recover soon or continue to fall. The latest job and housing numbers have yet to show any hit from the drop in oil prices, with both remaining steady and in line with seasonal patterns. But oil is Alberta’s main export. And going forward, the province is certain to suffer, especially on the employment front, from the drop in oil prices—and it is likely to slip into recession.

1    However, as we explain in our latest blog, we do not expect oil prices to continue to plummet.


Canadian Data Released to January 9, 2015


Key Indicators Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14
Household Sector
Employment (000s) 17,862 17,851 17,926 17,969 17,958 17,954
Employment change (000s) 42 –11 74 43 –11 –4
Unemployment rate (per cent) 7.0 7.0 6.8 6.5 6.6 6.6
Wage settlements (total, %) 1.8 2.1 1.4 1.7 1.5  
Wage settlements (public, %) 1.7 1.5 1.3 1.3 1.5  
Wage settlements (private, %) 2.0 2.4 1.7 2.5 n.a.  
Average weekly earnings
(Y/Y, %)
3.47 3.04 3.06 2.81    
Labour income (Y/Y, %) 4.21 3.63 3.78      
Retail sales (%) 0.00 –0.21 0.82 0.00    
Consumer Price Index (Y/Y, %) 2.11 2.11 2.03 2.36 1.95  
Motor vehicle sales
(units, millions)
1.999 1.960 2.016 1.971    
Housing starts (units, 000s) 203.3 196.0 197.0 182.2 193.2 180.6
Household saving rate     3.9      
Consumer confidence
(2002 = 100)
85.9 88.4 87.9 84.0 82.7 88.9
Business Sector
Real GDP at basic prices (%) 0.10 –0.06 0.41 0.34    
Manufacturing shipments (%) 2.51 –3.29 2.20 –0.61    
Wholesale sales (%) –0.03 0.04 1.77 0.11    
Real merch. exports (%) 0.88 –0.43 0.88 –1.43 –1.60  
Real merch. imports (%) 0.84 0.90 0.48 0.35 –1.79  
Merch. trade balance
(current $ millions)
24,430 6,990 3,924 –3,929 –7,732  
Industrial product price index
(Y/Y, %)
2.87 2.56 2.57 2.42 1.97  
Raw materials price index 
(Y/Y, %)
2.56 –0.71 –1.50 –2.32 –3.83  
West Texas Int. crude
(US$/barrel)
103.60 96.54 93.21 84.40 75.79 59.30
Business confidence
(2002 = 100)
    104.5      
Financial Sector
Chtd. bnk. personal loans
($ billions)
445.8 446.6 447.7 449.5 451.1  
Chtd. bnk. business loans
($ billions)
382.3 387.9 385.0 385.8 401.3  
Prime business rate 3.00 3.00 3.00 3.00 3.00 3.00
3–month T–bill rate 0.95 0.94 0.92 0.88 0.90 0.91
5–year mortgage rate 4.79 4.79 4.79 4.79 4.79 4.79
Exchange rate (C$/US$) 0.9312 0.9151 0.9081 0.8919 0.8829 0.8671
Cda.–U.S. 90–day
T–bill rate spread
0.92 0.91 0.90 0.86 0.88 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.


Labour Markets

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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Daniel Fields
Economist

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