On the surface, the Canadian labour market was in stagnation mode in April: total LFS employment stalled compared to the previous month (-2K) while the unemployment rate remained at 7.1%. This being said, we do not have to dig far below the surface to uncover the encouraging on-going reallocation of labour resources from commodity industries to non-resource sectors of our economy.
Without surprise, the most noticeable soft spot in April’s LFS report was the oil-producing Province of Alberta: from the previous month, 21K workers lost their jobs; bringing the year-over-year decline to 38K. In relative terms, the decline in total employment observed in the province, since crude oil prices plunged in late 2014, is milder than in 2009 and a far cry from the fallout observed in the 1980s. Given the wave of layoffs announced in Alberta during the last year and a half, a growing number of unemployed workers have been looking for jobs elsewhere. Some are finding new jobs in non-oil related industries within the province and some are moving to other provinces. This dynamic explains why Alberta’s unemployment rate figure of 7.2% is just a notch higher than the national average of 7.1% as interprovincial migration is increasing nationally. One beneficiary from this labour reallocation is British Columbia because mobile individuals located in Alberta are attracted by the several job vacancies available in Canada’s westernmost province. For instance, total employment rose by 13K from a month ago and by a remarkable 110K from a year ago. In percentage terms, total employment in BC is up 4.9% year-over-year (the strongest figure observed in more than 2 decades; see chart) and 3.3% year-to-date (almost tripling BC’s budget 2016 growth forecast of 1.2%). Also, BC is the only province with an unemployment rate figure below the 6% mark (5.8% in April, the lowest observed since 2008).
In Ontario, the pace of job creation eased during the last 3 months. In April, total employment virtually stalled (-3K m/m) and contributed to lift the province’s unemployment rate to a 17-month high of 7.0%. Nevertheless, the momentum in Canada’s largest province remains healthy on a year-over-year basis (+1.4%, +96K), led by the creation of full-time positions. In Quebec, recent surveys indicate healthy hiring intentions. However, the shrinking pool of labour (-0.2% year-over-year) appears to restrain companies’ ability to find new employees. In turn, total employment in Quebec only edged up by 2K in April (compared to March) and fell by -10K from a year ago. Also, Quebec’s unemployment rate stayed at 7.5% for a second consecutive month, at the low end of the usual 7.4%-8.0% range observed since 2012.
Bottom Line: The national LFS figures were unchanged in April compared to March but are hiding an efficient reallocation of labour across sectors and regions; the province of BC undeniably being the top performer. This occupational and regional movement of labour contributes to maintain Canada’s labour market resilience to the new environment of lower oil prices and a softer loonie. One sign of this resilience is the modest 0.5pp cumulative increase in the national unemployment rate figure observed since late 2014.
What’s next? The LBS Economic Research and Strategy team is monitoring the situation regarding the wildfires raging in Northern Alberta. Based on the latest news available, oil sands companies have cut their production by about 800K barrels per day, a quarter of Alberta’s 3.2Mbd total oil production. Combined with the major disruption in regional economies affected by the wildfires, the growing toll on Alberta’s oil industry could potentially bring Canadian real GDP q/q growth into negative territory in 2016Q2; following an approximate 3.0% q/q annualized solid expansion in 2016Q1. Also, this devastating natural disaster is likely to deteriorate the Province of Alberta’s already challenging fiscal situation; the $10.4B deficit projected in the 2016 budget released in mid-April could be revised up because of the unexpected costs to fight forest fires and the tax revenue loss associated with the pullback in economic activity.