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JOBS IMPROVE MODERATELY IN MARCH
• Employment gains by 17,900 with a shift toward part-time work and towards private-sector hiring.
• Unemployment rate remains at 8.2% as more youth workers enter labour force.
Canadian employment gained by a robust 17,900 jobs in March – slightly below consensus but in-line with the average 20,000 monthly job addition that we expect to see during recovery. The job gains point to a sustainable but not booming recovery, moderating from the break-neck advances witnessed in November and January.
Beneath the March headline numbers, there was also a shift away from self-employment and public sector jobs towards private sector hiring, which gained by 42,400 jobs last month. However, the net job gains were in part-time employment while full-time employment fell on the month. Moreover, hours worked fell by 0.4% M/M, partly as a consequence of the overall shift towards part-time work, involving shortened hours in particular sectors. The unemployment rate was unchanged at 8.2% with the labour force increasing as greater numbers of youths (15-24) sought work – presumably enticed by improving employment conditions.
The recovery has witnessed a strong shift towards service sector employment, with service employment 45,000 above its October 2008 level, while goods employment is still 286,000 below its previous peak. However, in March, job gains were concentrated in goods-producing industries, and in particular in the construction sector. Even while climbing on the strength of heighted construction investment, construction employment remains substantially below its peak. Improving demand for manufactured goods has helped to stabilize manufacturing employment but has not produced any meaningful new jobs as the sector posted negligible job gains for a sixth consecutive month in March. Manufacturing employment remains 212,000 below its September 2008 level.
Service-producing industries lost jobs in March. Service job losses were strongly concentrated in the transportation and warehousing sector, business support services, and “other” services (including repair and maintenance services) while professional, scientific and technical jobs improved by 38,000. Employment in the transportation and warehousing sector has seen a steady decline since September 2008, even with near-term improvements in demand for manufactured and wholesale goods.
Even while the output gap is easing, the presence of excess capacity continues to compel repricing of labour inputs. Average hourly wages fell on the month, and wage growth stands at 2.2% Y/Y compared with 4.3% Y/Y in March 2009. While core inflation has remained sticky, slower wage growth points to easing pressure on consumer prices.
Overall, the job growth in March is consistent with the expected pace of economic rebound, moderating from the clip witnessed in January. With economic strong growth having raised flags of a possible earlier Bank of Canada move on interest rates, the job numbers for March confirm a more moderate pace of recovery and are more consistent with the pace of growth anticipated by the Bank. These employment numbers allow the Bank some breathing room, insofar as a more gradual uptake of economic slack does not require aggressive removal of monetary stimulus to ease potential inflation pressures. With recovery now proceeding at a sustainable clip, we remain confident that the initial interest rate hike of a quarter point will come in July 2010, rather than ahead of the end of the conditional commitment.
Grant Bishop, Economist
416-982-8063
R.Paul Chadwick
TDCanada Trust
Manager Residential Mortgages
Tel: 905 334 4066
Fax: 905 332 1619
paul.chadwick@td.com
pchadwick.ca
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