Skip to main content

Canada’s labour market took a hit in August, erasing healthy job gains seen in July and sending the unemployment rate back up to 6 per cent.

The surprise loss of nearly 52,000 jobs in August follows a year of steady job creation and marked a volatile turn from a particularly strong July, in which Statistics Canada reported the creation of 54,000 positions.

Economists said the Labour Force Survey (LFS) has been showing signs that the employment market is recalibrating after a blockbuster year in 2017.

“It does look like employment growth has slowed in 2018,” said Josh Nye, economist with Royal Bank of Canada.

According to Statscan data, Canada has lost 15,000 jobs so far this year, compared with a gain of 241,000 positions in the same period last year. Wage growth, which started to pick up last summer, is starting to ease.

Ontario, one of the strongest provincial economies and the country’s biggest labour market, lost a staggering 80,000 jobs in August − the steepest decline since the global financial crisis.

One worrying trend, over all, is that private-sector jobs have declined by 74,000 positions so far this year, while public-sector employment has increased by 51,000. Some of the biggest losses have been in the high-paying industry of professional, scientific and technical services. But there were also losses in lower-paid areas of wholesale and retail trade, manufacturing and construction.

A possible reason for the shrinking private sector could be a lack of business investment. The trade dispute with Canada’s biggest trading partner, the United States, along with the stalled oil pipeline, has cast a cloud of uncertainty over Canadian businesses. In addition, the corporate tax cuts in the U.S. have improved business conditions south of the border.

“Why would you start to invest if you don’t know what the rules of the game are?” said Stéfane Marion, chief economist with National Bank of Canada.

Still, the volatility in the month-to-month numbers spurred economists to further caution against reading too much into the LFS report, which has a huge margin of error and is based on in-person interviews, phone surveys and electronic questionnaires.

“If you believe that Canada gained over 50,000 jobs in July and then ditched them all in August, then there’s land for sale at the heart of the Arctic circle with your name on it,” said Derek Holt, Bank of Nova Scotia's capital markets economics head, in a note.

“I struggle to think of what went so wrong in Ontario’s economy during August to validate the loss of 80,000 jobs. Given the history of problems with this report, the natural inclination is to treat such a decline with a lot of caution.”

Mr. Marion also questioned whether the job losses were credible, especially when StatsCan’s other labour report, the Survey of Employment Payrolls and Hours (SEPH), has shown impressive employment gains.

“Let’s not overreact,” he said.

According to the SEPH, 192,000 jobs were created in the first half of the year. In comparison, the Labour Force Survey shows a decline of 17,000 jobs for the same six months.

Economists consider SEPH numbers reliable since they are based on payroll data. But the SEPH is released about two months after the Labour Force Survey.

“StatsCan needs to make the SEPH more timely,” Mr. Marion said.

StatsCan pointed out that the LFS counts the number of employed persons and SEPH counts the number of jobs. Therefore, if someone has two jobs, those two jobs will be counted in the SEPH but not LFS, which could explain some of the discrepancies between the two sets of numbers. Also, the SEPH does not include self-employment − a significant part of the labour market.