Canadian investors took a breather last Friday, thanks to the real GDP report stating that the economy grew by 0.1% m/m in November.
Similarly, tomorrow should bring to market an encouraging Labour Force Survey report. We expect a net job creation of 15,000 for the month of January, broadly in line with consensus. The six-month moving average of job creation has slowed down from 54,000 in April to 12,000 in December, reflecting the elevated degree of labour shortages. It also highlights a slowdown in net hiring at the end of last year.
The three-month moving average of job creation has been in negative territory for two months. This is to a certain extent almost unseen since 2009. From a technical standpoint, a 28,000+ figure is necessary to bring back the three-month moving average in positive territory. This makes our 15,000 call almost a lower bound. This being said, an unusually high number of young Canadians have been hired during the holiday season in retail stores. Thus, our expectation of a large pullback in employment in the trade services restrains the chances of seeing a blockbuster headline employment figure.
Also, Bank of Canada watchers will continue to monitor the slight deceleration in Labour Force Survey hourly earnings. We forecast hourly wage rates to reach a still-robust 3.6% growth y/y in January, in line with consensus. Wage growth has slowed down to 3.8% in December from 4.4% in November.
With respect to provincial dynamics, there is a lot to tell. Quebec’s job market continues to improve in terms of quality: full-time job creation in the private sector and very few part-timers looking for full-time jobs, etc. However, the number of jobs created is restrained by labour shortages. British Columbia’s labour market is a mixed bag. We notice some improvement in Vancouver and Victoria due to the vibrant tech sector. There is some significant deterioration in B.C.’s interior regions, in part, due to the closure of several mills related to the shrinking timber supply. In Ontario, Toronto remains without surprise a leader in job growth. Ottawa’s job market is booming, reflecting a growing digital service sector. In Alberta, the level of employment has been flat and we do not foresee an imminent pickup. Granted, hiring in manufacturing and professional services are encouraging signs of diversification, but employment in construction and the oil and gas sectors remains in the slow lane. In Alberta, strong gains in services-oriented industries continue to offset losses in the oil and gas sector.
Finally, the economic impact of the coronavirus likely began too late in January and, thus, is more likely to be fully captured in the Labour Force Survey report of February through the impact on domestic consumer confidence, commodity prices and international trade. As a reference, the SARS outbreak led to short-lived and modest decline in employment and the number of hours worked during the spring of 2003.