- Canada lost more jobs than expected…
- ...but the details were not as bad as the headline…
- ...and the hit was likely transitory
Canada jobs m/m change (000s) / UR (%), SA, January:
Actual: -212.8 / 9.4
Scotia: -70 / 9.2
Consensus: -40 / 8.9
Prior: -62.6 / 8.6
Have I ever told you that I hate jobs reports? There, got that off my chest. Jobs clearly disappointed expectations despite the unfortunately very limited advance signals we have to go by. At least expectations got the sign right, but the magnitude of the decline is beyond what can be dismissed by mere sampling noise given a 95% confidence interval of +/-58k around the estimated 212.8k decline. So what happened and does it change anything for the BoC?
On the latter point, I would think the BoC would look through it as a transitory hit that is likely to bounce back as restrictions get eased and eventually we get greater progress toward vaccines. Their tools are obviously ineffective in terms of doing anything about last month’s jobs or future near-term reports and the underlying details to the report indicate that health restrictions were the dominant driver.
Still, we now have 858,000 fewer jobs than just before the pandemic struck which knocks back the amount of recovered jobs to 2.13 million since April (chart 1). There remains a lot of pain and suffering in the labour market when you see so many of your family, friends, neighbours and colleagues sidelined from the job market alongside other potential suffering. That’s still a large hill to climb in getting back to full employment, but it remains the case that the economy has come a long way in a short time and I still think that much further progress lies ahead. #keepthehope.
The details were not as bad as the headline for a few reasons.
At the top of the list of reasons is that hours worked were up smartly last month and remain on an upward trend. Hours worked drive aggregate pay—and hence spending—more so than shifts in the count of employed people. Hours worked were up by 0.9% m/m last month which probably happened because a) full-time jobs were higher, b) the 18.3 million who still had a job last month worked longer hours (yep, probably you), and c) this offset the reduced aggregate hours coming from the drop in part-time jobs.
On a quarterly basis, hours worked were up by 15.8% at an annualized rate in Q4 over Q3 and are so far tracking a 4.5% annualized rise in Q1—all seasonally adjusted. Check out chart 2. The speed of the rebound is why 95.5% of the lost hours worked in the initial stages of the pandemic have now been recovered.
You could say that counting hours is even more imprecise than this survey’s attempt at counting bodies employed, but the cross-check is that the rough rule of thumb behind Okun’s “law” is generally intact in terms of movements in the pace of GDP recovery and job markets (chart 3). The initial burst of activity in the economy and hiring was expected to come down from the stratosphere and it has which shifts the focus at the margin to expectations for future GDP and job growth which remains positive.
An added point on hours worked is that it indicates that January GDP could well stay in the black despite restrictions. GDP is an identity defined as hours worked times labour productivity with the latter defined as output per hour worked. The activity readings that determine output are all ahead of us for the month, but the gain in hours worked is a good start.
Second, all of the drop was in part-time jobs (-225k) as full-time jobs were up by about 13k. A job is a job in the headline, but again, if the hit is more to part-time jobs then total hours worked can be more resilient.
Third, sector breadth was modest. Chart 4 shows the sector breakdown and chart 5 shows cumulative changes in jobs during the pandemic. By sector, the biggest hit was in the wholesale/retail category (-168k). The next largest was in accommodation and food services (-75k). There were small losses in education (-13k), info/culture/recreation (-17k), business, building and other support services (-5.4k) and ‘other’ services (-8.8k). Within goods producing sectors, manufacturing jobs fell by 12.3k and agriculture shed 6.5k.
Fourth, by province, most of the hit was in Ontario (-154k) followed by Quebec (-98k) while other provinces were little changed. The one positive outlier was Alberta where about 21k jobs were added. This concentration upon Ontario and Quebec bolsters the point that the hit was driven by restrictions and not by something more sinister in the underlying drivers of job growth. Ontario and Quebec led the most aggressive restrictions in the country and so when they reduce restrictions we should see jobs bounce back.
All of the loss was in private sector payrolls where jobs fell by 211.1k. Public sector jobs were down by 10.7k with self employment up 9k.
Hourly wage growth accelerated to 5.9% y/y (5.4% prior) probably due to lower paying jobs dropping out.
The labour force shrank by 88k and the participation rate slipped which offset some of the impact of the decline in jobs on the unemployment rate that nevertheless climbed to 9.4%.
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