Total Canadian employment was up by 14K jobs in May, above the consensus estimate of +2K and our call of +8K. Monthly LFS numbers are usually noisy and the month of May is no exception. The outstanding gains in full-time employment (+61K) and the public administration (+69K) were partially inflated by the temporary hiring of people to conduct the 2016 census. Otherwise, full-time job gains were driven by the pick-up in hiring observed in cyclically sensitive industries: construction (+19K), manufacturing (+12K) and business support (+17K). Without surprise, employment fell in the mining, oil and gas sector (-16K).
Since labour market conditions are an important driver of provincial governments’ fiscal revenues, the LBS Economic Research and Strategy team prepared a table for bond investors comparing the 2016 year-to-date employment trend to the annual forecast for employment growth contained in the provincial budget documents (see below).
Firstly, the table indicates that the Province of BC is likely to be on track to register a stronger-than-expected surplus in FY 2016-17 due to its outstanding labour market performance. Thanks in part to the reallocation of mobile individuals from Alberta to BC, total employment rose by a remarkable 74K year-to-date; almost tripling BC’s 2016 budget growth forecast of 27K.
In Ontario, taking into consideration that some Canadians were temporarily employed in May to conduct the census, the year-to-date job creation is broadly in line with budget expectations.
With BC and Ontario, Quebec is the only other province of the small elite club where employment is up on a year-to-date basis. However, the 11K increase in total employment observed so far in 2016 is below the pace of job creation predicted in the Quebec budget. As we mentioned in the past, hiring intentions are healthy but the shrinking pool of labour appears to restrain companies’ ability to find new employees. This being said, this modest 11K increase in total employment results from the addition of 47K full-time job creation and the loss of 36K part-time positions, a positive development for the Province of Quebec’s fiscal receipts.
Among the seven other provinces, we find surprising that total employment is down and below budget expectations in the provinces of Nova Scotia and Manitoba where large-scale infrastructure and construction projects are propelling the local economy. In the oil-producing provinces of N&L and Saskatchewan, the year-to-date drop in employment is not surprising and on line with budget expectations. In comparison, the decline of the employed observed in Alberta is more severe but slightly better than predicted in the budget. Statistics Canada mentioned in its LFS report that “the impact of not collecting labour force data in Fort McMurray” is minimal on Alberta’s employment data (due to the wildfires, Statistics Canada decided to replace this missing information with values taken from respondents living in surrounding areas).
Bottom Line: The May LFS report is adequate, no more, no less. As mentioned in our previous reports, the occupational and regional movement of labour contributes to maintain Canada’s labour market resilient to the new environment of lower oil prices and a softer loonie. This allowed the Canadian economy to add a respectable 11K jobs per month on average during the last 6 months. Lastly, one surprising soft spot in the report came from the decline in the unemployment rate figure from 7.1% to 6.9%. More than half of this decline is due to a large drop in the labour force participation rate, now sitting at a 16-year low of 65.7%.
