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Briefing highlights

  • Pay levels deteriorating
  • Canada’s jobs market flat in June
  • Unemployment inches up to 5.5 per cent
  • Stocks, loonie, oil at a glance
  • Required Reading

Falling behind

The “quality” of Canadian jobs is eroding as increases in low- and mid-pay employment far outstrips that of higher-paying positions, CIBC World Markets says.

And that helps explain a lot, said deputy chief economist Benjamin Tal, whose study sheds light on why incomes are lagging even though the jobs market is booming and Canada boasts its lowest unemployment rate in decades.

“The disconnect between the Canadian jobs market and the economy in general, and income growth in particular, is, in many ways, defining the current cycle,” Mr. Tal said.

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“The labour market continues to create jobs at an impressive pace, with the unemployment rate at its lowest since the 1970s,” he added.

“At the same time, real GDP growth, while expected to improve during the year, is not remotely close to where it should be given the headline employment numbers.”

CIBC’s “index of employment quality” eroded by 1.4 per cent in the year that ended back in May, adding to its downward movement since the 1990s.

Growth in full-time employment may have outstripped that of part-time, but pay levels over that one-year period “reveals that the number of low-paying, full-time jobs rose very strongly relative to mid-paying jobs, with the weakest performance seen among high-paying industries," Mr. Tal said.

“The worsening composition of the compensation subindex reflects strong growth rates in relatively low-paying sectors, such as food services, accommodation, personal services, administration and personal care, as well as non-store retailing.”

Mr. Tal labelled as low-paying those jobs where compensation was below 85 per cent of the median wage. Mid-paying included 85-115 per cent of the median, and the higher end, more than 115 per cent.

Here’s what he found:

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Source: CIBC

The Globe and Mail

Not only that, but look, too, at the steady increase in the share of employees whose pay is below the average.

“That trend is consistent with a widening wage gap symptomatic of deteriorating labour market quality,” Mr. Tal said.

This, he added, helps explain the “disappointing pace of income growth” in Canada.

“Note that in the late 1980s, when our measure of employment quality was 15 per cent higher, a 1-per-cent increase in employment generated, on average, a 4.4-per-cent increase in real labour income,” Mr. Tal said.

“Today, it generates less than a 3-per-cent increase in real labour income.”

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Unemployment inches up

Unemployment in Canada inched up to 5.5 per cent in June as more people went hunting for work and the country lost about 2,000 jobs.

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The number of full-time jobs rose by 24,000 while 26,000 part-time positions disappeared, Statistics Canada said today.

“The tiny dip in employment – given the size of ‘normal’ swings in this notoriously volatile report – does nothing to change the narrative that Canadian labour markets still look relatively solid,” said Royal Bank of Canada senior economist Nathan Janzen.

“Employment is still up 421,000 from a year ago.The unemployment rate ticked up to 5.5 per cent, but from a new multi-decade low of 5.4 per cent in May, and labour force participation rates are still sitting around all-time highs once controlling for population aging.”

Notable, said Mr. Janzen, was that wage growth perked up to 3.8 per cent, a full percentage point higher than in May.

“The wage numbers, like the headline employment count, are notoriously volatile, so we would take the latest surge higher with a big grain of salt,” he said.

“Still, other wage measures have also shown signs of ticking a little higher in Q2. Recent readings provide perhaps some reason for optimism that underlying wage trends are picking up to closer to the 3-per-cent or higher rate that we would ordinarily expect at this point in the economic cycle.”

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In the U.S., in turn, the economy churned out a far greater-than-expected 224,000 jobs last month, while unemployment rose to 3.7 per cent from 3.6 per cent.

The U.S. jobs report raised questions about just how far the Federal Reserve could go if it indeed cuts interest rates soon, and exactly when.

“What these numbers tells us is that the pricing that a July rate cut is a done deal is anything but, and maybe investors need to start looking at the data, as opposed to hearing what they want to hear,” said CMC Markets chief analyst Michael Hewson.

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Markets at a glance

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Investment bank chief leaves Deutsche

From Reuters: Deutsche Bank said its investment bank head agreed to step down in a sign of the division’s waning influence as Germany’s largest lender readies a multibillion-dollar restructuring aimed at reversing a decline in its fortunes.

Regulator steps in

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From Reuters: Britain’s competition regulator has stepped in to pause Amazon’s investment in online food delivery group Deliveroo while it considers launching a full investigation. Britain’s Competition and Markets Authority said it served an initial enforcement order on the companies, signaling possible concerns about the transaction.

Samsung sees lower profit

From Reuters: Samsung Electronics Co. forecast a steep plunge in its second-quarter operating profit as the U.S.-China trade war wreaks havoc in global chip and smartphone markets, although one-off gains helped it beat analyst expectations.

Wells Fargo unit fined

From Reuters: Wells Fargo & Co.’s Irish subsidiary was fined US$6.6-million for a prolonged series of regulatory reporting breaches, the second-largest fine ever handed down by Ireland’s central bank.

Jaguar boosts U.K. auto sector

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From Reuters: Jaguar Land Rover is making a big investment to build electric vehicles in Britain, in a major boost for the U.K. government and a sector hit by the slump in diesel sales and Brexit uncertainty.

Google suspends alerting system

From Reuters: Google has suspended an e-mail alerting system in New Zealand following criticism by the government for publishing suppressed details of a murder case, the company said.

Required Reading

Sandpiper opposes HBC plan

Private-equity company Sandpiper Group has joined the list of Hudson’s Bay Co. shareholders opposed to a $1-billion privatization offer, giving added momentum to the deal’s critics, Rachelle Younglai and Jeffrey Jones write.

Fast and loose

Susan Krashinsky Robertson looks at how marketers are playing fast and loose with Kawhi Leonard’s name and image.

What if

Barrie McKenna examines the big question: What if Canada’s cannabis market never generates substantial profits?

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