MNI DATA ANALYSIS: Employment Disappoints, But Not Wages>

By Yali N'Diaye

     Ottawa (MNI) - The Canadian economy shed 88,000 jobs in January, 

more than the 9,000 decline expected by analysts in a MNI survey, and 

the largest drop since January 2009, data from Statistics Canada showed 

Friday. 

     The unemployment rate ticked up one percentage point to 5.9%, 

higher than the 5.8% expected by analysts, with the participation rate 

rising to 65.5%, its highest level since July 2016. 

     The January correction more than erased December's 64,800 gain, and 

was led by part-time employment, which was down 137,000, the largest 

decrease since the series began in January 1976. 

     On the bright side, however, full-time employment rose 49,000, 

marking its fifth consecutive increase. Since September, full-time 

employment has been up 277,800, while total employment has increased 

98,300. 

     Another positive sign was the reduction of the share of part-time 

workers for involuntary reasons as a percentage of part-time workers to 

21.6% from 25.4% a year ago. 

     --WIDESPREAD DECLINES 

     Declines in employment were widespread across industries, age 

groups, sexes and provinces, including for part-time employment only. 

     Employment in goods-producing industries fell 16,200, the largest 

drop since November 2016, led by construction (-14,900) and natural 

resources (-5,900). 

     The services sector lost 71,900 jobs over the month, the largest 

decrease since November 2008, with weakness across the board, led by 

educational services (-19,600), and finance, insurance, real estate and 

leasing (-18,000). 

     Private-sector jobs were down 70,700 in January, the largest drop 

since January 2009, as was the 112,000 drop in the number of employees. 

     Public-sector employment was down 41,200 and the number of 

self-employed, considered as less stable jobs, rose 23,900. 

     --WAGES ACCELERATE FURTHER 

     Job losses did not prevent wage growth from accelerating further in 

January. 

     Average hourly wages for permanent workers rose 3.3% 

year-over-year, the largest gain since March 2016, confirming a trend 

that started last May, after wage growth rose just 0.7% in April 2017, 

the lowest rate on record. 

     In Ontario, the minimum wage was raised to C$14 per hour from 

C$11.60 at the beginning of January, and will be raised to C$15 from 

January 2019. It will then be indexed on inflation. 

     In Alberta, the minimum wage will rise to C$15 per hour in October 

2018 from C$13.60 currently. 

     Yet the impact of Ontario's minimum wage increase on January wage 

growth numbers was unclear. 

     Ontario's contribution to the 3.3% gain was estimated at 1.3 

percentage points, after 1.2 points in December. But Quebec and British 

Columbia's contributions also increased, to 0.8 points from 0.5 points, 

and 0.6 points from 0.5 points, respectively. 

     Total hourly wage growth was also 3.3% year-over-year, up from 2.7% 

in December, with wage gains accelerating not only in Ontario (3.4% from 

2.7%), but also in Quebec (3.6% from 2.4%). It slowed down in British 

Columbia (3.9% from 4.3%), however. 

     According to the Bank of Canada, the minimum wage increases could 

lift CPI by roughly 0.1 percentage point but reduce GDP by 0.1 

percentage point by early 2019 based on a structural general equilibrium 

model. 

     Based on a simple reduced-form model estimating the direct 

pass-through effect, minimum wage increases would boost CPI by 0.1 

percentage point on average next year. The impact would be 0.0 to 0.1 

percentage point in 2019. 

     On the other hand, both employment and consumption are likely to be 

negatively affected. 

     Weaker labor demand would translate into fewer jobs and a 0.3% 

decline in hours worked. 

     "While the net impact on labor income would be positive, employment 

would fall by 60,000 - a number that lies in the lower part of a range 

obtained from an accounting exercise (30,000 to 140,000)", according to 

a staff paper published at the end of December. 

     In Canada, the BOC estimates that 8% of employees work at the 

minimum wage and past experience shows that such raises have affected 

15% of employees at the lowest wages. 

     In January, job losses in Ontario were more in high paying jobs, 

according to a Statistics Canada analyst. 

  --MNI Ottawa Bureau; email:yali.ndiaye@marketnews.com 

     [TOPICS: M$C$$$,MACDS$]