There's little doubt that Canada's March employment numbers were bad. The question is just whether we should be surprised about that.
Among commentaries issued by Bay Street economists Friday, there's a sense that a bad number in the labour force survey was inevitable at some point, given that Canada's economic data in general haven't looked all that supportive of the kind of job gains the report had shown earlier in the year. A shoe had to drop, and this was it.
"Hiring had been on a suspiciously strong trend in the last half year despite a tepid pace for economic output, so today's report simply brings the two series into better line, rather than necessarily indicating a big negative for output ahead," said Avery Shenfeld, chief economist at CIBC World Markets.
"Prior to today, there had been a seeming disconnect in Canada between sluggish GDP growth and surprisingly perky employment gains. Suffice it to say, GDP won, and jobs have lost their perk in the short space of a month," said Douglas Porter, chief economists at Bank of Montreal. "While March's hefty decline no doubt exaggerates the weakness in the job market, renewed solid employment gains will be difficult to come by in a world of soft domestic spending and a still-strong dollar."
Krishen Rangasamy, senior economist at National Bank Financial, said the "awful" March labour force survey brings it more in line with the survey of employment, payrolls and hours – Statistics Canada's other, less closely followed employment gauge, which canvasses employers and has looked less rosy than the labour survey.
"So, one needs to look at the results in context, i.e. statistical adjustment may not imply a real meltdown of the labour market. Rather, the March report highlights that the labour market isn't as strong as first thought," he said.
Dawn Desjardins, assistant chief economist at Royal Bank of Canada, noted that with March's big jobs correction, Canadian employment averaged an 8,600-a-month decline in the first quarter – evidence that economic growth might be more tepid than the Bank of Canada has been projecting.
"Our monitoring of the economic data indicates a pick up in the pace of activity with real GDP on track to record a 1.9-per-cent annualized gain in the first quarter. This is slower than the Bank of Canada expected in its January forecast, and we expect the bank to revise down their forecast on April 17," she wrote. "What will be more interesting is whether this leads them to reduce the forecasts for growth in the following quarters."
But Mr. Rangasamy argued that some of the details of the labour data still support an improvement in GDP growth in the first quarter.
"Despite the drop [in jobs] in March, hours worked in Q1 grew 1.8 per cent annualized, picking up from Q4's pace of 0.4 per cent and consistent with a rebound in Q1 GDP," he said.