Canadian job market still very strong

Labour market data for October, released by Statistics Canada this morning, surely put to rest any suggestions that the economy is facing a prolonged slowdown.  The marginal decline in GDP for August reported by StatsCan earlier this week, coming in the wake of a flat reading in July, had led some analysts to proclaim that the run of strong data seen through the first half of the year was definitively at an end.  It seems nobody told the labour market.

The headline number -- an employment increase of more than 35,000 -- was well above the analysts consensus, which had called for a rise of just 15,000.  The details of the report were even stronger than the headline.  Full time employment rose 88,000 in the month bringing the increase over the past two months to a remarkable 200,000*.  Part-time employment fell by more than 50,000 in October.  On a year-over-year basis, full time employment has risen by 397,000, partially offset by a decline of 88,000 in the number of part time jobs.  Although the unemployment rate ticked up to 6.3 percent in October, it stands 0.7 percentage points lower than a year ago.

There are signs that the tightness in the labour market is having an effect on earnings.  The year-on-year rise in average hourly earnings in October was 2.4 percent, the fastest gain since April 2016.   As recently as April of this year, this increase had been as low as 0.7 percent. Although the Bank of Canada has signalled its intention to be cautious in making any further tightening moves, this is a trend it will be following closely in the months ahead.

The one caveat that needs to be kept in mind in assessing this very strong employment report is that employment is usually a lagging indicator of economic activity.  This may mean that the strength in employment as the economy enters the final quarter of the year simply reflects the strong growth seen in the first half.  If this is the case, the deceleration in GDP growth seen in Q3 may translate into slower employment gains in the month ahead. That caveat aside, there is little to dislike in today's report.

*  Remarkably, it looks as though the strike at a GM plant in Ingersoll, Ontario from mid-September to mid-October, which led to widely-publicized layoffs across the Province,  had no discernible impact on the national employment numbers.