- Canada unexpectedly lost 42k jobs in August…
- ...while the unemployment rate held steady as the labour force shrank
- Surging hours worked indicate cautious hiring, working employees longer…
- ...and suggests very strong Q3 GDP growth, earlier closure of spare capacity
- Canadian jobs m/m 000s / UR %, SA, August:
- Actual: -41.7 / 6.4
- Scotia: 20 / 6.3
- Consensus: 15 / 6.4
- Prior: 75.1 / 6.4
Canada lost jobs but worked longer hours in August. About 42k jobs were lost with soft details (chart 1), but hours worked are on a tear (charts 2, 3). This could reflect a conscious choice by employers to be a little more restrained in adding a greater number of workers in favour of giving them more hours. The implications for GDP and the Bank of Canada are mixed but more hawkish than dovish; they won’t overreact to August jobs but GDP tracking may ring alarms.
Hours worked were up by 0.6% m/m SA in back-to-back fashion. They are tracking a Q3 gain of about 5% q/q SAAR. That’s the biggest gain since 2021Q4.
Since GDP is hours worked times labour productivity, a still tentative 5% jump in hours is a very strong starting point for tracking GDP. We need a lot more activity readings over the quarter in order to form a rough opinion on productivity, but it would have to be nearly disastrous to offset such strength in hours.
As chart 4 shows, manufacturing added 22k jobs. Along with info/culture/rec (+12k) and healthcare and social services (6k), these were the only sources of job gains last month. The rest of the picture was weak as most other sectors posted job losses led by business support services (-20k) and retail/wholesale (-11k).
The seasonally unadjusted number was the second worst on record for like months of August (chart 5). That was partially reined in by the fact that the seasonal adjustment factor continues to drift higher for like months of August over time (chart 6). The lost jobs would have been bigger if not for a higher SA factor.
The unemployment rate was unchanged at 6.4% despite disappointing jobs because the labour force shrank by 37k last month which was about as expected. The participation rate has been holding steady (charts 7, 8).
Wage growth has ebbed. August came in at –6.9% m/m SAAR after –2.3% the prior month. The figures are exceptionally volatile (chart 9) but the year-over-year growth in wages has fallen back to just 2% which points to recently falling real wages given CPI is running hotter than wages.
Since spending is significantly driven by pay and pay is wages times hours worked in aggregate the effects cancel out for August but indicated strong prior income employment growth. Wages times hours were flat in August (-0.1% m/m SAAR), but up 4.8% in July and 10.6% in July.
Chart 10 shows lost jobs were in Ontario and Quebec.
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.