MNI DATA ANALYSIS:Behind Weak Headline,Wage Progress Confirmed

By Yali N'Diaye

     OTTAWA (MNI) - The data from Statistics Canada's Labor Force Survey,

published Friday, were disappointing on the surface as the Canadian economy shed

jobs in April, but details showed progress on the wage front.

     The Bank of Canada recognized such "progress" in its April 18 policy

statement, which, along with rising inflation, gave it greater confidence in the

need to proceed ahead with the normalization process.

     At the time, the average hourly wage growth for permanent workers had

stabilized at 3.1% year-over-year in March and February, down from 3.3% in

January, raising questions on whether January marked a peak or whether February

and March were just a temporary pause.

     In addition, the BOC estimated in April that despite progress, the

wage-common, a measure of the underlying trend, was 2.7%, below the 3% rate that

has historically been consistent with an economy without labor market slack. LFS

wage data are only one input used by the BOC to calculate the wage-common. The

indicator also uses data from the payroll survey, the national accounts and

productivity.

     April 3.3% LFS wage gain provided evidence wage growth progress continues,

which should keep the BOC's confidence intact on that front.

     --FULL-TIME GAINS

     Friday's data showed the economy shed a net 1,100 jobs in April, which was

below analysts' expectations in a MNI survey that centered on a 16,000 increase.

     However, behind the weak headline figure, which was due entirely to a drop

in part-time employment, signs of progress remained in addition to the wage

data.

     Most notably, full-time employment further increased in April by 28,800,

following a 68,300 rise in March, bringing the total year-to-date to 106,800.

     --INVOLUTARY PART-TIME

     Also on a positive note, part-time workers for involuntary reasons

accounted for 22.1% of total part time in April, down from 22.2% in March and

24.0% a year earlier.

     The BOC is keeping an eye on that aspect of the labor market for signs of

its overall health.

     --LOWER PARTICIPATION RATE

     That being said, the participation rate declined to 65.4% in April, which

had not been matched since November 1999. The last time it was lower was in

October 1998.

     What's more, the decline was led by a lower youth participation rate, a

particular source of concern for the central bank looking at "untapped

potential" for the Canadian economy as it continues to monitor capacity. 

     Youth participation rate declined to 63.4% in April from 63.8% in March,

the lowest level since last September.

     "Young people represent one source of untapped potential," Governor Stephen

Poloz said in a March 13 speech. They "are not participating in the workforce as

much as they did 10 years ago."

     He estimated that raising the youth participation rate to its pre-crisis

level would add 100,000 jobs for young Canadians.

     "An even more significant source of economic potential is higher labor

force participation by women," he said.

     On that front, Friday's report brought good news, with women's

participation rate increasing to 60.9% in April from 60.8% in March.   

     So overall, Friday's data should comfort the BOC on its path to raising

rates, while giving no reason to rush into a May 30 hike, which still leaves a

July 11 hike as the most likely outcome so far. By then, the central bank will

also have a better idea of the economy's response, especially the housing

sector, to higher interest rates.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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