After the Canadian economy added only 30K jobs in the 6 six-month period from September 2015 to February 2016, employment rose by a brisk 41K in March alone. This surprise leap in job growth, well above the market consensus of 10K,suggests that the Canadian economy is gaining some traction –and echoing the solid real GDP report released last week.
The service-oriented sectors led the way, an emerging trend propelled by a weaker Canadian dollar allowing private companies to offer expertise abroad at a competitive price. For instance, net hiring in the well-paid professional/technical services industry was positive in March (+12K), a notable success story in Ontario which leads the Canadian provinces in terms of total job creation (+14K in March; +86K year-over-year). However, it we should not be expecting to see further robust job creation gains in the education and health care sectors. The March number (+32K) was simply a rebound from the poor performance registered during the previous month, reminding us to be cautious with the interpretation of granular monthly numbers.
Moreover, the broad picture of the labour market was far from being entirely rosy in March. Difficulties persists in the both cyclical manufacturing (-34K) and construction (-6K).
Finally, the most puzzling statistic of the month is the 19K employment surge recorded in Alberta,; by far the best monthly showing since the plunge of oil prices that started in the second half of 2014. Accordingly, Alberta’s unemployment rate figure fell significantly from 7.9% in February to 7.1% in March, inexplicably sitting at the same level as the national figure, below Quebec’s (7.5%) and barely above Ontario’s (6.8%) unemployment rates. We would not be surprised if this turns out to be a temporary blip since the most recent survey conducted by the Canadian Federation of Independent Businesses indicated that, within the next 3 months, there were 21% more SMEs located in Alberta that were planning to cut full-time staff than SMEs which were thinking of hiring full-time staff.
Bottom Line: Altogether, this constructive LFS report brings the 3-month and 6-month moving averages to 11K job created, the strongest figures observed since October 2015. This improvement is not inconsistent with the BoC’s spring edition of the Business Outlook Survey (BOS)indicating that the outlook on hiring intentions is modest but better than the pessimistic winter survey.
While the worse appears in the rear view mirror for the Canadian economy, it is premature for investors to contemplate a more upbeat tone from the BoC since the medium-term global outlook remains far from rosy. Accordingly, the BoC is likely to opt for a cautious message at its next policy rate deliberation on April 13th, taking the same view as Fed Chair Janet Yellen in the U.S. Yet, a rate cut does not appear to be in the cards either.
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