Data disaster

There's nothing ambiguous about the Canadian employment data for November.  They're terrible.  StatsCan reported this morning that employment fell by 71,000 in the month, the worst showing since the depths of the global financial crisis back in 2009.  The national unemployment rate jumped a startling 0.4 percentage points to 5.9 percent. So much for my suggestion a month ago that the relative weakness in employment in October would be "largely unwound" in November because of the end of the strike at General Motors. Mea maxima culpa.

There is no consolation to be found in looking behind the headline numbers. Employment fell for the key male age cohort (ages 25-34). It fell in the goods-producing sector, led by declines in manufacturing and resource industries.  It fell in the services sector, a development only partly explained by the termination of positions related to the Federal Election in mid-October.  It fell in the private sector.  It fell for both full-time and part-time work.

It's customary to point out the volatility of the Canadian employment data: the monthly changes in employment are not infrequently smaller than StatsCan's estimate of the standard error in its sampling.  Not this time: the standard error for the number of persons employed is 30,100, suggesting that there is little likelihood that the data are providing a misleading picture.

The analyst consensus for today's number was for a 10,000 increase in employment, so this is a spectacular miss.  Possibly the tall foreheads on Bay Street were lulled into a false sense of security by the soothing tone of the Bank of Canada's rate announcement earlier in the week.  The odds that the Bank will have to join the global easing party in the near future just shortened dramatically -- and Justin Trudeau must be thanking his lucky stars that the fixed election date fell when it did.

The weakness in Canadian employment is particularly jarring when viewed against developments south of the border. US non-farm payrolls jumped 266,000 in November and data for the preceding two months were revised higher.  The unemployment rate ticked down to a 50-year low of 3.5 percent.  The end of the GM strike accounts for only a small portion of the November increase. The data won't stop Donald Trump from lambasting the Fed if it keeps rates on hold next week, as it surely will, but Trump would do well to count his blessings. If the Fed keeps its powder dry for now, the chances of the US economy remaining strong until election day look remarkably good.