Canadian employment at a standstill – Nomura

Charles St-Arnaud, Research Analyst at Nomura, notes that Canada’s recent employment gains were virtually flat in April, declining by a small 2.1k, roughly in line with expectations, following a gain of 40.6k in March.

Key Quotes

“Despite the underperformance in job creation, the unemployment rate remained unchanged at 7.1% owing to a decline in the participation rate.

On an industry basis, the goods-producing sector decreased by 37.1k, with most of the losses in manufacturing (-16.5k), natural resources (-7.8k), agriculture (-7.0k) and construction (-5.7k). The level of employment in the goods-producing sector is now at its lowest since February 2012. The service sector gained 35k jobs, mainly in trade (+35.0k), accommodation and food (+21.9k), while there were some losses in business, building and other support services (+-16.0k) and other services (-11.9k).

Growth in average hourly wages for permanent workers, an indicator followed by the Bank of Canada (BoC), decelerated to 3.1% y-o-y. Wage pressures remain high, despite the amount of slack in the labour market, according to the BoC.

Overall, this is a weak jobs report which suggests that the labour market has stalled. As such, the six-month average increase in employment is very weak at only about 3.4k. Moreover, the continued decline in manufacturing jobs, coupled with the latest trade data, signals that the recovery in non-resource exports could be faltering. We would highlight that next month’s employment number is likely to be very strong because of the temporary hiring in the public sector for the Census. Nevertheless, the data and events in Canada suggest that growth should be weak in Q2.”