If the Bank of Canada was looking for more reasons to keep interest rates at historically low levels, the latest dismal employment numbers ought to do the trick.
The Canadian economy shed 9,400 jobs in June, pushing the unemployment rate up slightly to 7.1 per cent from 7 per cent in May and underscoring a deep divide in the national labour market. Alberta, which remains the country’s growth engine, added 9,400 jobs, while Ontario suffered a steep loss of 34,000.
The poor numbers helped drive down the value of the dollar and bolstered the case for the Bank of Canada to turn even more dovish on monetary policy at next week’s policy-setting meeting.
The central bank “wants to see the dollar going down” to fuel an export-led recovery, said Benjamin Tal, deputy chief economist with CIBC World Markets. “It will basically use any excuse to continue the message that the economy is not as strong as perceived by many, [and] the [higher] inflation numbers are temporary. Anything that helps the dollar [weaken] is welcome as far as the Bank of Canada is concerned.”
Ontario’s hard-hit manufacturing sector continues to bear the brunt of the disappearing jobs. “The Ontario economy and especially manufacturing are divorced from the recoveries taking place in various parts of North America,” said Andrew Violi, president of Toronto-based safety shoe manufacturer Mellow Walk Footwear.
“It doesn’t look like there’s much light [at the end of the tunnel] just yet,” said Benjamin Reitzes, senior economist with BMO Nesbitt Burns. “The strong dollar and soft U.S. demand have put significant pressure on Canadian manufacturing and Central Canada as a whole. That pressure really hasn’t been alleviated yet.”
The monthly readings from Statistics Canada have been remarkably volatile, veering between losses and gains over the past six months and making a shambles of economists’ forecasts. Their consensus call was for a gain of about 20,000 jobs.
The trend over the past year is unmistakeable: The labour market is deteriorating in the face of sluggish economic growth and extreme caution in the private sector.
The labour market has been limping for some time, with job creation over the past year of just 72,000, or 0.4 per cent.
“This was the lowest year-over-year growth rate since February, 2010, when … employment growth resumed following the 2008-2009 labour market downturn,” the federal statistics agency said.
The latest report was not entirely devoid of good news. Full-time jobs rose by 33,500, and people in the core working-age group over the age of 25 also found more employment opportunities, which means the losses were concentrated among part-time workers. Construction employment also picked up, adding almost 32,000 people.
But two other variables remain troubling. The employment-to-population ratio – the number of people working as a percentage of the adult population, inched lower to 61.4 per cent from 61.5 per cent. It now stands just slightly above the low point reached in the last recession.
The number of hours worked, which is closely watched by the Bank of Canada, slid 4.7 per cent annually in the second quarter. “You usually don’t see that kind of decline outside of a recession,” Mr. Reitzes said.
The weak report comes as no surprise to Bill Hammond, CEO of Guelph, Ont.-based transformer manufacturer Hammond Power Solutions Inc., because “the Canadian economy and certain sectors in particular are struggling.” He cited energy, mining infrastructure, commercial construction and industrial manufacturing as sectors that won’t see substantial employment growth until the U.S. and Canadian economies firm up – which is unlikely to happen before 2015.
“Employment will probably improve next year, but at this point in time people are going to run fairly lean,” Mr. Hammond said. “There is a fair bit of overcapacity in manufacturing. Most of us want to see that there is a sustained trend of growth, particularly in the United States, before we start adding people. This has been the slowest and strangest recovery that I have seen in my 37 years in manufacturing.”
Slumping employment growth in the private sector “highlights the continuing caution on the part of businesses, and their increasing reliance on bolstering productivity to generate increased output and earnings,” said Aron Gampel, Bank of Nova Scotia’s deputy chief economist. “Under these conditions, policy makers should maintain a pro-growth focus.”
The drumbeat of bad news in manufacturing rolled on this week, with forest products company Cascades Inc., announcing that it will close a paper manufacturing plant in East Angus, Que., eliminating 175 jobs when it takes effect Oct. 3.
“The East Angus plant has not managed to maintain a competitive edge in the market despite significant investments and serious recovery efforts,” Luc Langevin, president of Cascades’ specialty products group, said in a statement.
Imports of cheap goods from offshore are also leading to job cuts.
Energex Tube in Welland, Ont., has been shut since May while its parent JMC Steel Group awaited a U.S. ruling on whether South Korean steel for use in the energy industry is being dumped into North America. The Commerce Department found Friday that the steel is indeed being sold below the cost of production.
Nevertheless, about 100 hourly and salaried employees are out of work, said Rick Alakas, president of Unifor local 523 in Welland, which represents hourly paid workers at the plant.