The Quick Take: August 10, 2018
Good Employment Growth Hides Weak Details
“Today’s Labour Force Survey release showed a strong topline employment gain; however, the underlying details painted a much less positive picture of the economy. While employment rose significantly, the number of full-time jobs declined and year-over-year wage growth continued to weaken despite a near record-low unemployment rate. A continued weakening of wage growth will put some downward pressure on the prospects of wage-induced inflation, which could keep the Bank of Canada on the sidelines in the near-term.”
The economy gained 54,000 new jobs in July. The number of part-time positions increased by 82,000 while full-time positions declined by 28,000.
Employment gains were led by Ontario (+60,000), British Colombia (+11,200) and Newfoundland and Labrador (+2,400).
The unemployment rate declined from 6.0 per cent in June to 5.8 per cent in July.
The drop in the unemployment rate was driven by the strong increase in employment. However, labour force participation rates also declined slightly as people left the workforce.
Year-over-year growth in hourly wages declined significantly, from 3.6 per cent last month to 3.2 per cent in July.
This decline is especially significant considering that year-over-year hourly wage growth also weakened in June. The slowdown in wages is bad news for households who face higher debt servicing costs over the next several years. Wage growth has been very weak over the past two years but picked up in early 2018. The recent easing of growth suggests recent increases were not sustainable in the face of trade restrictions and increased economic concern.
Regionally, the weakening of year-over-year hourly wage growth was led by Quebec (which saw an increase of just 1.4 per cent in July after 2.1 per cent in June), Alberta (which saw an increase of 1.7 per cent after 2.8 in June) and British Colombia (which saw wage growth slow to 5 per cent after 6.1 in June).
From an industry perspective, the goods sector led the weakening (Which slowed to 2.5 per cent in July after 3.7 per cent in June). Services industries also declined slightly, from 3.6 in June to 3.3 per cent in July.