MNI INTERVIEW: Canada Job Data Keep Defying Gloom-Govt Analyst

There’s plenty of evidence Canada’s hot job market has momentum beyond a pandemic rebound, a senior government analyst told MNI, even as many economists doubt good times will last even through the next few quarters.

"We’re in a different sort of gear,” says Statistics Canada senior analyst Andrew Fields, who helps lead preparations of the monthly Labour Force Survey.

“What’s funny too is it does seem everybody’s still sort of watching it very closely as if it’s always on some kind of precipice,” he said of the job market. “In the data we aren’t seeing any signs of it turning and declining we’re seeing continued growth.”

The BOC stopped raising interest rates in March on evidence inflation is slowing to 3% in the next few months and Governor Tiff Macklem predicts the economy will show slack in the second half of the year. Other experts have been forecasting a mild recession for a while now, with Bank of Montreal for example saying GDP will contract in Q2 and Q3 while joblessness climbs from 5% to 5.7% in Q4.

BROAD-BASED JOB GAINS

Canada's job market remains a standout as growth fades following last year's snap-back after Covid restrictions eased. Employment has climbed for seven months through much of a 425bp jump in borrowing costs that slammed the housing market and pinched consumer finances. March's unemployment rate held at 5%, close to last year's record low 4.9%. April job figures are due May 5, assuming a recent government strike seeking higher wages doesn't disrupt operations.

Job gains are also of the broad-based sort the BOC said it could only dream of when inflation was comfortably at 2% under its recently refreshed policy mandate. The unique expansion following the end of Covid restrictions is drawing in marginalized workers.

“The proportion employed has increased across almost all demographic groups. Recent immigrants, moms with young children, that typically have lower employment rates, are seeing some of the biggest increases,” Fields said.

Employment rates have climbed even with the government boosting the population at the fastest pace in decades through record immigration. More surprising, the number of unemployed people has been little changed even with all the new residents.

FROTHY WAGE GAINS

Wages have also caught up with inflation by gaining 5.3% from a year ago. BOC officials say wage gains of around 5% aren't consistent with restoring 2% inflation, one reason Macklem has said he could hike again or hold at the peak for longer.

Gains for workers and their paychecks run against arguments from the left-leaning NDP that the Bank is needlessly crushing the economy. While governing Liberals claim the gains of working women are due to their expanded childcare programs, Fields said the data isn't clear on whether it's also linked to employers offering more flexible work or families forced to work more to cover rising prices.

The unique boom has implications for central banks arguing they can achieve a soft landing by paring record vacancies rather than forcing layoffs. There’s also a danger loose monetary policy will create a wage-price spiral. (See: MNI INTERVIEW: BOC Has Done Enough To Slow Inflation-CD Howe)

Senator Clement Gignac, a former BOC and finance department adviser, called wages "the main risk" to the inflation outlook in an interview. Gignac sees little evidence the job market is about to tank, saying “I agree with the Governor that we’re very unlikely to see severe recession, defined as many quarters in a row with a significant unemployment rate increase.”

Wages are rising in part because workers are migrating to higher-paying industries, Fields said, suggesting the spiral concern is overblown. Employment in a category of science-related jobs climbed 5.2% in the last year while hospitality jobs remain below -pre-pandemic levels. Self-employment has also fallen 5.5% since the pandemic, another sign people are getting higher-quality jobs.

With supply-side forces prominent, the virtuous cycle may see population growth and new jobs add to the economy’s supply and curb inflation aggravated by pandemic breakdowns. In Canada, new immigrants are offsetting retiring Baby Boomers.