- Canada’s labour market added 259k jobs in February, almost fully recovering the 266k lost over the previous two months. This was well above consensus estimates that called for a 75k gain. Despite the improvement, the level of employment was still 3.1% below its year ago level. Last month’s employment gain was concentrated in part-time positions (+171k), but full-time jobs increased as well (+88k).
- Along with employment, Canada’s labour force also saw growth in February (+25k). As the employment gain was larger, the unemployment rate declined from 9.4% to 8.2% last month, the lowest since March last year. The number of long-term unemployed (unemployed for 27 weeks or more) also fell by 49k in February.
- Broken down by sector, the services sector added 256k jobs in the month, with retail trade (+122k), accommodation and food services (+65k), and educational services(+29k) seeing the largest gains. The retail industry recovered 76% of the employment losses in January. The rise in accommodation and food services employment was attributable to easing restrictions in Ontario and Alberta. Still, this industry remained the hardest hit by the pandemic, with employment 26% below its February 2020 level. On the goods side, gains were relatively more muted (+3k). Construction (+7k) and manufacturing (8k) saw decent gains, while agriculture (-9k) and forestry, fishing, mining, oil & gas (-6k) lost jobs on the month. Zooming out, employment in six of the 16 industries was above pre-pandemic (February 2020) levels.
- As expected, Quebec (+113k) and Ontario (+100k) drove the employment rebound. In Ontario, the unemployment rate fell to 9.2%, one percentage point lower than what it was in January. Notably, employment was essentially unchanged in the Toronto census metropolitan area, where restrictions were still in place through February. B.C. (+27k), Alberta (+17k), and Manitoba (+16k) saw employment gains, while Newfoundland and Labrador (-15k) experienced a decline.
- Adding to the positive string of data, total hours worked increased 1.4% m/m in February, suggesting economic output continued to improve through the second month of 2021.
Key Implications
- Wow, what a bounce back. Canada’s labour market made a statement in February, almost making up the entirety of losses in December and January. Although employment is still 600,000 jobs below last year’s level, today’s data presented evidence that a strong economic recovery is at hand as the pandemic is brought under control and public health measures are loosened.
- Indeed, with provinces continuing to lift restrictions, the labour market is poised to continue to recoup pandemic-related losses in March. The outlook beyond March is somewhat more hazy, however, and will depend on whether new more contagious variants of the virus fuel a rise in caseloads and hospitalizations. As the vaccine rollout is only now beginning to accelerate, there is a chance that a third wave of the pandemic results in another round of restrictions, thereby slowing the labour market recovery.
- The Bank of Canada will take note of today’s release. This adds another datapoint to the growing list of indicators suggesting that the economic recovery is progressing ahead of schedule. If the vaccine rollout mitigates the risk of a third wave of the pandemic, there may be less need for maintaining the overnight rate at 0.25% through to 2023.
