Canada: Job market downshift not necessarily signals tougher times - Wells Fargo

According to analysts from Wells Fargo,  the apparent downshift in job growth does not necessarily signals tougher times for the Canadian economy.

Key Quotes:

“Last year was a stand-out for the Canadian economy, and that was particularly evident in the labor market. In 2017, Canadian employers expanded payrolls by the most in 15 years. More than 400,000 net new jobs were added at an average pace of about 35,000 jobs per month. In the fourth quarter, hiring picked up to an average monthly gain of 57,900 jobs. Since the start of 2018, the job market has been more hit-and-miss.”

“We are not convinced that the apparent downshift in job growth necessarily signals tougher times for the Canadian economy. While it is true that job growth has slowed and the unemployment rate has stalled at 5.8 percent for the past three months, the recent weakness has been more evident in part-time work than full-time.”

“Canadian businesses are increasingly hiring full-time workers and cutting part-time staff the employment picture given that these provinces comprise 60 percent of Canadian employment.”

“Another sign of strength in the Canadian jobs market is that workers are getting paid more. Average hourly earnings ticked up in seven of 10 provinces and 12 of 16 industries from March to April.”

“There is no shortage of hand-wringing in financial markets about the jobs news; the Canadian dollar was off about four cents versus the U.S. dollar in the immediate wake of the employment report. On that basis, it appears that not everyone shares our admittedly sanguine assessment of the job market. The real question is what the Bank of Canada thinks about the labor market and the extent to which the recent acceleration in earnings growth will translate into higher inflation.”

“We have concerns about elevated consumer debt levels and overheated home prices, Canada’s full year GDP growth was 3.0 percent in 2017 and economic conditions remain supportive for modestly higher inflation. Core measures of the CPI have edged higher but remain in the middle of the BoC’s target range. That ought to be supportive of another rate hike in the second half of the year, in our view.”


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