Canada
Employment rose 7K in July according to the Labour Force Survey, close to the 5K expected by consensus. The jobless rate, however, remain unchanged at 6.8% as the participation rate fell one tick to 65.7%. The increase in July employment was entirely due to self-employment (+41K) which more than offset declines in the private sector (-28K) and government (-6K). Part-time employment rose 24K, while full time employment fell 17K. Hours worked fell 0.4% as a result. The goods sector cut headcount by 12K with expected declines in resources but also cyclical sectors like manufacturing and construction dwarfing small gains in utilities.Services sector employment was up 19K driven by info/culture/recreation, education and professional services which more than offset declines in health care,accommodation/food services, trade, and finance/real estate. Alberta and Saskatchewan continue to lose jobs, joined this month by BC and Manitoba. Employment was up sharply in Quebec but was flat in Ontario.
Overall, the employment report was weak as gains were entirely due to self-employment ─ paid employment was down a massive 34K the worst drop in a year due to declines in both government and the private sector. Also disappointing were declines in cyclical sectors like manufacturing and construction. Western provinces continue to struggle in light of the oil shock. The picture is better when looking at the morereliable longer-term trend. Year-to-date job gains average adecent 15K/month, with Central Canada offsetting weakness in energy rich provinces (AB, SK, NL). However, it’s worth noting that only about a fifth of the 15K came from the private sector.
Building permits jumped a consensus-topping 14.8% in dollar terms in June. There was a 13.2% increase in the value of non-residential permits (driven by commercial and institutional buildings), and a 15.9% increase for the residential sector. In real terms, residential permits rose 13.7% due to a 20.3% surge for multis and a 2.2% increase for singles.
The merchandise trade deficit narrowed to C$0.5 bn in June, from a C$3.4 bn deficit in the prior month. That was the most favourable trade balance since November last year. The improvement in June was due to a surge in nominal exports (+6.3% is the biggest jump since December 2006) and a drop in nominal imports (-0.6%). With the exception of autos and aerospace, all major export categories saw healthy increases. The import slump was largely due to energy. So much so that the energy trade surplus bounced back to C$5.2 bn, the highest since November. The non-energy trade deficit narrowed to C$5.7 bn (smallest deficit since July last year) from a record C$8 bn in the prior month. In real terms, Canada’s exports surged 4.8% while imports fell 0.8%. For Q2 as a whole, export volumes were up 0.7% annualized while real imports were down 1.4%. That suggests trade was a contributor to growth last quarter. Investment spending, however, was probably a massive drag based on weak imports of machinery and equipment in the quarter.
What we’ll be watching
In Canada, a light data week will feature manufacturing shipments for June. Solid gains in factory-related exports suggest shipments surged at the fastest pace in years. We’ll also get a pulse of the housing market in July thanks to data on residential construction and home prices for both new and existing homes. The latter, measured by the Teranet/National Bank house price index could show a seventh straight monthly increase, buoyed by likely gains in hot markets such as Toronto and Vancouver. Still, a below-seasonal increase should allow the annual home price inflation rate to drop to 4.6%. Residential construction should remain resilient based on solid permit applications. As such, we’re expecting housing starts to be around 195K in July.