MNI STATE OF PLAY: Watching The Pace of Growth Slowdown

By Yali N'Diaye

     OTTAWA (MNI) - The Canadian economy shed 88,000 jobs in January, putting an

end to a streak of consecutive gains that dates back to July 2016 that should

reinforce the Bank of Canada's scenario of a growth slowdown and it alert as to

the pace of such slowdown.

     In and of itself, Friday's employment report is unlikely to move the

balance of risks to make the central bank more cautious.

     One reason is that job creation has been occurring at a sustained rate for

months and wage growth, despite January job losses that sent the unemployment

rate up to 5.9% from 5.8%, continued to accelerate.

     --BEYOND THE HEADLINE

     Average hourly wages for permanent workers rose 3.3% in January, the

largest gain since March 2016, confirming the upward trend that started in May

2017.

     To be sure, Ontario raised its minimum wage on January 1st to C$14 per hour

from C$11.60.

     However, Ontario's contribution to the 3.3% wage gain was 1.3 percentage

points, not much more than December's contribution of 1.2 points.

     The BOC estimates that 8% of employees work at the minimum wage in Canada

and past experience shows that such raises have affected 15% of employees at the

lowest wages. 

     Behind the negative headline numbers, there were other important positives,

starting with the fact that the 88,000 employment decrease was entirely due to

part-time positions, which were down 137,000, the largest decline since the

series began in 1976.

     Full-time employment, on the other hand, rose 49,000, marking the fifth

consecutive increase, totaling 277,800 full-time jobs created from September to

January. Over the same period, total employment increased 98,300 as 179,500

part-time jobs were lost.

     Furthermore, the share of part-time workers for involuntary reasons as a

total of part-time employment, another indicator followed by the BOC, was

another positive point, as it declined to 21.6% in January from 25.4% a year

earlier.

     --SLOWDOWN FACTORED IN

     Besides, the BOC has already factored in a growth slowdown, expecting a

2.5% annualized real GDP growth pace in the fourth quarter and the first

quarter.

     That being said, for the data-dependent BOC, Friday's numbers reminded the

need to carefully assess the impact of the cumulative tightening on economic

activity, which so far has held up despite recent signs of a slowdown.

     The NAFTA renegotiations also remain a key uncertainty that the central

bank is closely monitoring.

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

[TOPICS: M$C$$$]