Resilience in the face of low oil sees economy add 59,000 jobs

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Canada's labour market has long been split between sturdy growth in energy-rich provinces and more cautious hiring elsewhere. Now, lower oil prices and a weaker Canadian dollar are flipping that around.

The unemployment rates for Alberta and Newfoundland hit four-year highs in May, while Ontario's rate was below the national average for the first time in nearly nine years. The jobless rate in Canada's most populous province fell to 6.5 per cent – its lowest since the recession – while the country's national rate stayed at 6.8 per cent.

The Bank of Canada is counting on non-energy exporters to propel growth this year, taking the sting out of weaker investment and job cuts in the energy sector. Still, there have been some wrinkles of late, with a contraction in first-quarter gross domestic product, weak U.S. output and soft April trade numbers.

Last month's gains in full-time jobs suggest that "an improvement in non-energy provinces is finally starting to offset the decline coming from oil-producing provinces," said Sébastien Lavoie, assistant chief economist at Laurentian Bank Securities.

Across Canada, employers added 58,900 jobs in May, the biggest increase in seven months – most of them in Ontario, British Columbia and Nova Scotia, Statistics Canada said Friday. Monthly numbers bounce around, but a six-month average shows employment has risen by 15,200 on average per month over the past half year, suggesting some resiliency in the face of lower oil prices.

The private sector led the way, as factories boosted hiring for the second consecutive month while business services, finance and the retail sector all added to the head count in May.

"A big relief after a steady diet of bad news," said Royce Mendes, senior economist with CIBC World Markets Inc.

Manufacturing employment is still more than 200,000 off its prerecession highs, Mr. Mendes observed, adding that "this is only one reading in a volatile series and we will need to see more signs that demand is making a comeback."

For Ontario, last month marked the first time since June, 2006, that its jobless rate was below the national average. It's too early to say whether the job-growth trend will last: Before May's hiring, employment was flat from a year ago.

"It would be premature to say Ontario is on the verge of creating a significant amount of jobs, as it did back in the late 1990s/early 2000s," Mr. Lavoie said. Factory hiring so far suggests "a step in the right direction rather than showing the renaissance of Ontario's manufacturing," he said.

Guelph, Ont., is now home to Canada's lowest jobless rate, at 3.7 per cent. (It's not a blip: The unemployment rate in the city just west of Toronto has been 5.1 per cent or lower for the past half year.)

"We have a diverse economy here," said Peter Cartwright, general manager of the Guelph Economic Development Office. "We have a good blend of industrial, commercial and institutional jobs in this city."

The jobless rate also fell last month in British Columbia, the province oft seen leading economic growth this year, while Manitoba now leads year-over-year job growth. Alberta, Saskatchewan and Newfoundland – the three provinces most exposed to lower oil prices – all saw higher unemployment rates last month.

In other signs of strength, wage growth firmed and private-sector full-time jobs led May's increase. In the United States, Canada's largest destination for exports, employers added 280,000 jobs last month and hourly wages rose, suggesting growing momentum.

Canada's broadest measure of unemployment – called the R8, which includes discouraged workers and involuntary part-timers – stood at 10.1 per cent last month, lower than a year ago when it was 10.4 per cent, though higher than prerecession levels.

* Students have yet to see much improvement in the jobs market. The jobless rate for students aged 20 to 24 rose to 15.1 per cent in May, up 1.5 percentage points from the same month last year. Their rate of employment was 59 per cent – little changed from a year earlier.

* Economists are divided on the outlook for hiring. Toronto-Dominion Bank expects job creation to "decelerate as 2015 progresses," as economic activity remains "weak" in the second quarter and employers focus on efficiency gains over expanding payrolls.

* Bank of Montreal said the Statscan report suggests that "the economy is recovering from the very challenging start to the year," and that record auto sales in May, combined with strength in home sales and better U.S. jobs data, show that "there are plenty of signs that the economy was growing again nicely in the late spring."

With report from Seres Lu