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The good news and bad news about Canadian jobs numbers

It's no secret that the quantity of new Canadian jobs has stalled in recent months. But maybe we should be more worried that the quality is eroding, too.

Statistics Canada this week issued its Survey on Employment, Payrolls and Hours (SEPH) showing that Canada's nonfarm payrolls shrunk by 11,900 jobs in February, after a 3,000-job decline in January. On a year-over-year basis, payroll employment was up 132,000 – but for the past six months, jobs have increased on average by a measly 1,300 a month.

Sure, the more closely followed Labour Force Survey, which Statscan publishes about six weeks ahead of the SEPH for each month, has already shown a smart rebound in March of 43,000 net new jobs. (Many economists consider the SEPH to be the more accurate measure, as it uses a combination of actual tax payroll deductions and a survey of employers as its sources of data, rather than the LFS's poll of households.) Nevertheless, the trend in the LFS hasn't been much better: A six-month average of just 3,400 jobs created per month, prior to the March rise.

Whether March proves to be a turning point has yet to be seen. (The April LFS, which might provide the first hints on this, is due out May 9.) But a bigger issue than the pure job count may be that the jobs that are being created don't look to be particularly good ones.

David Madani, Canada economist for U.K.-based economic research firm Capital Economics, wrote in a research note this week that, over the past year, Canada's employment gains have been concentrated more in industries where average weekly earnings are below the national average. This is in contrast to the strong Canadian jobs recovery from mid-2010 through 2012, when most of the job gains were in above-average-paying industries.

The SEPH data show that one of the biggest contributors to job growth over the past 12 months – the accommodation and food services sector, which provided 20 per cent of all jobs added in the country – is also the lowest paid. Average weekly earnings ($369) in the sector are 60 per cent less than the national average ($925). The health care and social assistance sector, which provided the most new jobs – 27 per cent of the national total – has an average weekly wage 8 per cent below the national average. The administrative support, waste-management and remediation-services segment, which produced 12 per cent of the nation's job gains, has average earnings 17 per cent below the national average. Together, these three low-paying sectors accounted for nearly 60 per cent of all the jobs Canada added in the past year.

Meanwhile, employment in two of the highest-paying job sectors, utilities ($1,748 a week) and management ($1,403), actually declined in the past year. Another above-average-paying segment, the huge manufacturing sector ($1,003), also contracted – removing 15,000 jobs from the country's totals by itself.

The upshot is that Canada's job creation can no longer be assumed to provide as much fuel for consumer spending as we saw in earlier stages of the recovery. Mr. Madani predicts that household income growth in the first quarter may be less than half the pace seen in the fourth quarter, and well below the levels seen routinely through 2012.

When you consider that household consumption was responsible for the bulk of Canada's gross domestic product growth both in the fourth quarter and in 2013 as a whole, it's easy to see why there's lingering concern about the underlying momentum of the Canadian economy. And why the country's policy makers keep insisting that we need other segments of the economy – such as exports and business investment – to step in and pick up the slack.

Meanwhile, employment in two of the highest-paying job sectors, utilities ($1,748 a week) and management ($1,403), actually declined in the past year. Another above-average-paying segment, the huge manufacturing sector ($1,003), also contracted – removing 15,000 jobs from the country's totals by itself.

The upshot is that Canada's job creation can no longer be assumed to provide as much fuel for consumer spending as we saw in earlier stages of the recovery. Mr. Madani predicts that household income growth in the first quarter may be less than half the pace seen in the fourth quarter, and well below the levels seen routinely through 2012.

When you consider that household consumption was responsible for the bulk of Canada's gross domestic product growth both in the fourth quarter and in 2013 as a whole, it's easy to see why there's lingering concern about the underlying momentum of the Canadian economy. And why the country's policy makers keep insisting that we need other segments of the economy – such as exports and business investment – to step in and pick up the slack.

Follow David Parkinson on Twitter at @ParkinsonGlobe

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