‘Less than meets the eye’: Canada adds 9,300 jobs amid weak wages
The country’s unemployment rate stuck to its 43-year low of 5.6 per cent last month as the economy closed out 2018 by adding 9,300 net new jobs, Statistics Canada said Friday.
But even in a job market that has tightened over the past year the agency’s latest data release shows the key indicator of wage growth continued to show weakness in December.
Year-over-year average hourly wage growth for permanent employees was 1.49 per cent — up slightly from its November reading of 1.46 per cent, but much lower than its peak last May of 3.9 per cent.
Experts have been expecting wages to rise as more people find work. Instead, its sharp deceleration since the middle of last year is viewed as a good reason for the Bank of Canada to wait a little longer before hiking interest rates.
“There’s just no way that this figure does not give the Bank of Canada more space to wait and see before raising interest rates,” Ranko Berich, head analyst at Monex Canada and Monex Europe, said in an interview.
“I think, if anything, this completely takes the likelihood of a policy move any time in the next three months down to zero.”
The Bank of Canada has been monitoring wage growth ahead of its rate decisions as it tries to determine how well indebted households can absorb higher borrowing costs.
The central bank, which will make a rate announcement next Wednesday, has raised its benchmark rate five times since the summer of 2017 in response to Canada’s strong economic performance.
Governor Stephen Poloz has signalled that more increases will be needed to prevent inflation from rising too high.
“Call this one ‘less than meets the eye’. The headline unemployment rate may have defied expectations to remain at a record low 5.6 per cent, but the way we got there was less encouraging,” Brian DePratto, senior economist with TD Bank, wrote in a note to clients.
“We suspect that behind the scenes, the Bank of Canada is also a bit puzzled by the combination of healthy trend employment gains and decelerating wages.
“Without bottom-up wage pressure, further monetary tightening is clearly not urgent.”
Some analysts saw promising signs in Friday’s wage data, which marked the end of a six-month streak of slowdowns.
Average hourly wage growth for all employees accelerated to just under two per cent last month — only slightly above the latest core inflation reading.
“Certainly, wage growth over the last couple of months has been disappointing, especially when you look at the tightness in the labour markets across the country,” Alicia Macdonald, principal economist for The Conference Board of Canada, said in an interview.
“We have been expecting wage growth to start to pick up heading into this year and we read this morning’s report as a positive first step.”
A closer look at the December jobs numbers revealed softer details. Canada shed 18,900 full-time jobs and added 46,400 less desirable self-employed positions.
The net gain of 9,300 for the month was deemed too low by Statistics Canada to be statistically significant. The result follows a gain of 94,100 net jobs in November, the country’s largest monthly increase since March 2012.
Economists had expected the addition of 5,500 jobs in December and a jobless rate of 5.7 per cent, according to Thomson Reuters Eikon.
For the second straight month, the December jobless rate was 5.6 per cent — its lowest level since Statistics Canada started measuring comparable data in January 1976.
Alberta, which has been hit hard by a drop in oil prices, saw a net decrease last month of 16,900 jobs or 0.7 per cent, compared with November, as an increase in part-time work was far outweighed by a loss of 36,200 full-time positions.
For all of 2018, employment in Alberta rose 0.9 per cent as the province added 21,600 jobs. The provincial unemployment rate fell from seven per cent at the start of 2018 to 6.4 per cent at the end of the year.
Across the country, there was a gain of 163,300 net new jobs in 2018 for an increase of 0.9 per cent, which was a slower pace of growth compared with 2.3 per cent in 2017 and 1.2 per cent in 2016, Statistics Canada said.
Employment growth in 2018 was concentrated in the services sectors, which generated 151,000 positions compared to an increase of just 12,300 in goods-producing industries.
In 2018, employment for women aged 25 to 54 grew by 125,600 positions or 2.2 per cent, compared to an increase of 60,600 jobs or one per cent for men in the same age category.
With files from BNN Bloomberg