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The Canadian Month at a Glance: November 4, 2011

Economy Sheds Jobs

by Ksenia Bushmeneva

After posting strong gains in September, the labour market lost 54,000 jobs in October, pushing the unemployment rate up two basis points to 7.3 per cent. Particularly discouraging is the fact that all of the losses were in full-time employment, with the number of full-time workers declining by 72,000 in October. That more than wiped out all of the September gain. Part-time employment improved slightly in October, helping to offset some of the losses. The job losses were concentrated in construction and manufacturing, which together shed 68,000 jobs. Employment in manufacturing was down 2.7 per cent compared with October 2010. The latest numbers also show a decline in employment among young people and women aged 25 and over. Still, total employment levels for both groups remain higher than they were a year ago. Among Canadian provinces, higher employment in the natural resource sector helped Manitoba, Saskatchewan, and Alberta record slight increases in employment. Newfoundland and Labrador was the only province to post a significant gain.

The latest GDP results brought some positive news, as the economy expanded by 0.3 per cent in August, marking the third consecutive month of growth. The August gains were concentrated among goods-producing industries, which advanced by 0.9 per cent on a monthly basis, thanks mainly to increased output in the energy sector (up 2.8 per cent). After increasing 1.4 per cent in July, manufacturing output fell 0.4 per cent in August, led by a decrease in durable goods production. Construction edged up slightly, with gains in residential building and repair work helping to offset a decline in non-residential construction.

The labour market lost 54,000 jobs in October, pushing the unemployment rate up to 7.3 per cent.

Service-sector industries posted a mixed performance in August, leaving the sector’s output largely unchanged. After growing 1.8 per cent in July, wholesale trade fell 1.4 per cent, with significant decreases in sales of petroleum products and motor vehicles and parts. Increased sales at gas stations and motor vehicles and parts dealers (as Canadians continued to travel during the final full month of summer) outweighed decreased sales of general merchandise and helped to propel retail trade by a modest 0.2 per cent. The finance and insurance sector rose 1.4 per cent. However, this increase was partly the result of a higher volume of stock market trades, as investors reacted to elevated global risks and uncertainty over the ongoing European debt crisis. Public sector output remained unchanged, as increases in health-care services and education were offset by a decline in federal government activity, mainly as a result of the winding down of the 2011 Census.

Overall, after contracting in the second quarter of this year, Canada’s economy will post a strong rebound in the third quarter.

In August, imports grew faster than exports, increasing Canada’s nominal trade deficit from $539 million to $622 million. Exports to the United States were down 2.3 per cent, while exports to other countries increased 7.9 per cent, signalling increased diversification of trade.

A larger harvested area and higher crop yields due to good mid-summer weather conditions have Western farmers anticipating higher production of wheat (up 3 per cent), canola (up 1.1 per cent), and barley (up 3.8 per cent) this year. Corn for grain production estimates for Ontario and Quebec are down. However, Quebec farmers anticipate a record soybean harvest. In the 12 months to August, farmers received 3.4 per cent higher prices for their crops, with prices for grains up 6.5 per cent and prices for oilseeds soaring 24.6 per cent. Prices for livestock and animal products rose 12.5 per cent on an annual basis, due in part to higher feed grain costs.

The latest inflation figures show some welcome relief for consumers—prices were lower for food, shelter, energy, and gasoline.

On a year-over-year basis, the consumer price index (CPI) increased by 3.2 per cent last month. However, relative to the previous month, the index gained only 0.2 per cent. The largest price increases were in transportation (up 0.8 per cent), clothing and footwear (up 4.9 per cent), and household furnishings and equipment (up 0.4 per cent). Despite this, the latest inflation figures show some welcome relief for consumers—prices were lower for food, shelter, energy, and gasoline. Although, food and gas prices have posted dramatic hikes in the last 12 months, rising by 4.3 per cent and 22.7 per cent respectively, both subsided slightly in September. The Bank of Canada’s core inflation rate—a measure that excludes the most volatile components of the CPI—reached 2.2 per cent. That put it slightly above the Bank’s 2 per cent target for inflation. Despite the increase, the Bank decided once again to leave its target for its key overnight interest rate unchanged at 1 per cent. The low overnight rate will continue to provide significant monetary policy stimulus to the Canadian economy as it battles strong economic headwinds.

The financial markets’ roller-coaster ride continued in October, due to the inability of European leaders to resolve the Greek debt tragedy. The prospects of a Greek referendum on the bailout plan took everyone by surprise and shook financial markets worldwide once again in early November. (On November 3, however, Greek Prime Minister George Papandreou reversed course and said there would be no referendum.) Despite the gloomy global outlook and a recent downgrade of Canadian growth projections by the Bank of Canada, Canadian firms remain cautious but hopeful, as evidenced by the result of the Bank’s autumn Business Outlook Survey. While businesses still intend to increase employment and investment in machinery, their intensions are more moderate. Consumers, on the other hand, appear to be more pessimistic. The Conference Board of Canada’s Index of Consumer Confidence declined 3.3 points in October, falling to its lowest level since May 2009.



Canadian Data Released to November 4, 2011

Key Indicators May 11 Jun. 11 Jul. 11 Aug. 11 Sep. 11 Oct. 11
Household Sector
Employment (000s) 17,309 17,337 17,344 17,339 17,400 17,346
Employment change (000s) 22 28 7 –6 61 –54
Unemployment rate (per cent) 7.4 7.4 7.2 7.3 7.1 7.3
Wage settlements (total, %) 1.8 1.7 1.7 1.9    
Wage settlements (public, %) 1.5 1.5 1.7 1.7    
Wage settlements (private, %) 2.3 2.3 1.6 2.2    
Average weekly earnings (Y/Y, %) 3.03 2.51 1.95 1.93    
Labour income (Y/Y, %) 4.68 4.78        
Retail sales (%) 0.23 0.76 –0.54 0.54    
Consumer Price Index (Y/Y, %) 3.70 3.10 2.74 3.08 3.17  
Motor vehicle sales (units, millions) 1.535 1.697 1.588 1.582    
Housing starts (units, 000s) 190.0 196.1 214.0 192.4 207.6  
Personal savings rate   4.1        
Consumer attitudes (2002 = 100) 85.6 83.1 81.3 74.7 75.0 71.8
Business Sector
Real GDP at basic prices (%) –0.34 0.23 0.44 0.29    
Manufacturing shipments (%) –0.57 –1.22 2.99 1.41    
Wholesale sales (%) 2.30 0.09 0.87 0.16    
Real merch. exports (%) 2.08 –2.22 4.94 –1.15    
Real merch. imports (%) –0.25 1.07 0.17 –0.20    
Merch. trade balance (current $ millions) –16,711 –14,908 –6,468 –7,466    
Industrial product price index (Y/Y, %) 4.65 5.43 5.16 5.23 5.30  
Raw materials price index (Y/Y, %) 25.60 23.20 19.58 13.31 15.21  
West Texas Int. crude (US$/barrel) 101.33 96.29 97.19 86.33 85.61 86.41
Business confidence (2002 = 100)   103.7     92.6  
Financial Sector
Chtd. bnk. personal loans ($ billions) 372.9 374.2 376.2 377.5 378.1  
Chtd. bnk. business loans ($ billions) 308.6 310.7 303.4 303.2 301.2  
Prime business rate 3.00 3.00 3.00 3.00 3.00 3.00
3-month T-bill rate 0.96 0.92 0.93 0.93 0.87 0.87
5-year mortgage rate 5.59 5.39 5.39 5.39 5.19 5.29
Exchange rate (US$/C$) 1.0331 1.0238 1.0468 1.0175 0.9974  0.9806
U.S.-Cda. 90-day T-bill rate spread 0.92 0.88 0.89 0.91 0.86 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.

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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.
Sources: The Conference Board of Canada; Statistics Canada; CMHC Housing Time Series Database.
Ksenia Bushmeneva Ksenia Bushmeneva
Economist
Forecasting and Analysis

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