Highlights:
- Employment rose 9k in December, not giving back any of the outsized 94k gain recorded in November.
- Ontario created 18k new jobs but that was offset by a similar decline in Alberta. The latter’s pullback follows a 24k increase in November. On an industry basis, growth was led by manufacturing while services employment recorded a modest decline in December.
- The unemployment rate held steady at 5.6%, a 44-year low. That is down from 5.8% a year ago.
- Wage growth for permanent employees remained slow at 1.5% in December. For the year as a whole, hourly pay growth picked up to 2.7% from 1.6% in 2017.
Our Take:
We expected a modest pullback in employment growth in December following a whopping 94k gain in November, so today’s reported 9k increase was a pleasant surprise. And the unemployment rate, which had fallen by 0.4 percentage points in the prior three months, managed to hold steady at a 44-year low. 2018 certainly wasn’t as impressive as 2017 in terms of job gains, but it still represented another year of solid improvement in Canada’s labour market. Employment growth averaged 14k per month in 2018, all of it full-time, and 3/4 of industries recorded gains for the year. Q4 proved to be the best month for job growth and also saw the largest decline in the unemployment rate. We think that will contrast with a soft quarter for GDP growth—our current tracking is for annualized growth of slightly more than 1% to close out the year.
The latest jobs reports, along with the Q4 Business Outlook Survey, give the BoC some positive data points to consider at next week’s policy meeting. Nonetheless, we think recent tightening in financial conditions, growing global growth concerns, and lower oil prices will lend the MPR a dovish tone overall. Well-behaved inflation and muted wage growth (as reported today) give the BoC time to be patient and evaluate how those factors are impacting Canada’s economy in early-2019. We continue to think interest rates will move higher this year—low unemployment points to an economy at its capacity limits—but don’t expect a move until Q2.
