The Canadian economy churned out an impressive number of new jobs over the first half of the year, but is not likely to repeat the feat in the second half.
The odds of the unemployment rate falling much below its current 7.2 per cent over the next five months are looking increasingly dim, as economists trim their expectations for Canada’s economic growth to below 2 per cent for the rest of 2012.
Signs of the sluggish economy are expected to crop up in Statistics Canada’s employment figures for July, set to be released Friday. The slow pace of growth likely won’t be enough for employers to justify adding the 26,000 new jobs per month that Canada has averaged since January.
“If we can hold to something like 15,000 jobs a month, that’s reasonable,” said Avery Shenfeld, chief economist at CIBC World Markets. “If Canada were an island unto itself we might be quite disappointed by that, but given what’s happening in the rest of the world, we’ll be counting our blessings that it isn’t worse.”
About 181,000 jobs have been created in the past 12 months, many of them full-time, and about half in the manufacturing and natural resource sectors. The problem is these industries are particularly sensitive to the global business cycle, Mr. Shenfeld said. With growth slowing worldwide, they are unlikely to make the same gains in the months ahead.
The American economy, still Canada’s top export market by a wide margin, slowed to a 1.5-per-cent pace of growth in the second quarter. That, combined with a recession in parts of Europe, has put a drag on the Canadian economy. Economic growth was just 0.1 per cent in May, according to Statistics Canada, and economists expect the annual figure to clock in at or just below 2 per cent, compared with 2.4 per cent in 2011.
While domestic demand is still relatively strong, the global headwinds are pushing the Bank of Canada to delay interest rate hikes in an effort to encourage businesses to invest and hire.
Modest hiring in July, combined with a rise in the number of people looking for work, might actually bump the unemployment rate back up to 7.3 per cent, exactly where it stood one year ago, said Paul Ferley, chief economist at Royal Bank of Canada.
The Bank of Canada’s business outlook survey from July showed 59 per cent of companies surveyed expected to do some hiring over the next 12 months, especially if theirs were small- or medium-sized business. Only 6 per cent said they would cut staff.
Any employment gains would be good news for Amy Legate Wolfe, who recently graduated with a Bachelor of Arts and specialization in history from the University of Toronto. For people her age, the job market has been bad, and there’s some risk it will get worse.
While employment picked up for the general population over the past year, people aged 15-24 actually lost 43,000 jobs. The youth unemployment rate is 14.8 per cent, more than double the rate for Canadians as a whole. Looking to tougher economic times ahead, the rate is likely to push higher.
After graduating with honours, Ms. Wolfe, 22, hoped her hard work would pay off with meaningful employment, but after seven months, she’s still looking.
“My ultimate goal would involve broadcasting, where I am willing to work in any position and work my way up as long as it had anything to do with this field,” Ms. Wolfe said.
The companies planning to hire in the coming months are tied to the healthiest sectors of the Canadian economy, such as energy.
“Our Alberta businesses do a lot of stuff directly or indirectly for the oil patch and the oil patch is still strong,” said Mike Pyle, chief executive officer of Exchange Income Corp., a holding company that owns several industrial-product and aviation businesses in Canada and the United States. Mr. Pyle plans to add between 5 per cent and 10 per cent more jobs to the 35,000 employees who currently work across the 10 companies owned by Exchange Income.
“It’s not massive expansion,” but it’s something, he said.