Canada jobs data: hold the doom and gloom

 A week ago, in the wake of the report of falling Canadian GDP in Q2 and July and the disappointing US jobs report for August, I posted about the sudden outbreak of doom and gloom among economists: It's legitimate to wonder if the dreaded Delta variant may have a negative effect on the economy, but the speed with which economists have swivelled to adopt that as their base case scenario is surprising.    Then the Bank of Canada came out with a rather more balanced take on the growth outlook,  noting that the only real source of weakness in the economy was the export sector, and that Consumption, business investment and government spending all contributed positively to growth, with domestic demand growing at more than 3 percent.

So today we saw Canada's employment data for August, and at this point, it looks as though the Bank of Canada's view is more valid than the suddenly-changed consensus among analysts. The economy added 90,000 jobs in the month, well above market expectations. This was the third straight monthly gain and brought the national unemployment rate down to by 0.4 percentage points to 7.1 percent, its lowest level since the onset of the pandemic.   Full-time employment accounted for 69,000 of the new jobs, with service industries leading the way as pandemic restrictions were generally eased across the country.

Some economists are trying to pooh-pooh the data -- check out the bank economist quoted here who claims to be able to spot some "flies in the ointment" -- but the numbers seem to suggest that the Canadian economy's recovery is continuing,  as the Bank of Canada said.  This is not to suggest that everything is back to its pre-COVID normal: total employment is still 0.8 percent below its pre-pandemic level, and of course the labour force has grown in the interim, which is why the unemployment rate is still so high.  Data for overall labour market underutilization and the percentage of persons working from home also indicate that the recovery still has some way to go. But the fears that were being expressed a week ago seem to have been seriously overstated.

Canada's Federal election campaign has ten days to run. Opposition parties have seized on the weak GDP data and recent high inflation numbers to argue that the Liberals are mismanaging the economy. It will be interesting to see if Trudeau and his team will try to capitalize on these strong employment numbers in the dying days of this entirely unnecessary campaign.