February saw the Canadian economy add 15.4k jobs on net, only slightly offsetting January’s 88k loss. The participation was effectively unchanged, resulting in a drop in the unemployment rate to 5.8%.
In another reversal from January, it was part-time jobs that drove the gains, up 54.7k (January: -137k). Full-time employment declined 39.3k net positions, ending a five month streak of net job additions.
The bulk of the gains were seen in the public sector (+50.3k), while the private sector added 8.4k net jobs. Holding back the overall pace of gains was a decline in self-employment, down 43.3k in February after four months of net increases.
By industry, net job additions came from the service-producing sectors (+25.9k), with notable increases in health care (+24.5), other services (+16.6k), and transportation (-12.6k). Trade stood out on the negative side, shedding 22k net positions. Goods-producing industries subtracted 10.4k from the total, led by a 16.5k net decline in manufacturing employment.
On a regional basis, Ontario led the way, adding 15.7k net positions – not enough to offset January’s 50.9k net loss. Performances were mixed across the remaining provinces. Of note, Alberta’s unemployment rate fell to 6.7%, a 1.5 percentage point decline relative to its year-ago level, as the provincial participation rate fell slightly in February.
Wages decelerated a tick in February, to 3.1% year-on-year (from 3.3% in January). Despite part-time work driving the net job gains, aggregate hours worked were up 3.2% year-on-year, supported by a month-on-month gain of 0.6%.
Key Implications
Canada’s monthly jobs market roulette wheel landed on 15.4k this month, a positive development but not enough to reverse January’s losses. Beneath the headline were relatively encouraging details. Part-time employment may have led the gains as full-time pulled back, but gains in employees led the way as self-employment declined. What’s more, hours worked gained nicely in February, and wage growth remained above 3%. With a tight labour market, headline job gains are likely to trend around or slightly below February’s pace going forward – what will matter more are these underlying details.
With the monthly variation a casino game, yearly changes matter: Overall employment was up 282.5k on net relative to last February, entirely due to full-time job gains. To be sure, the pace of yearly gains is moderating (having peaked at 427k in December), but this is to be expect given that economic and labour market slack has largely been absorbed.
At a 3.1% pace in February, wage growth marked a fourth straight month above its longer-term average of 2.6%. This would normally be suggestive of a tight labour market. However, as expressed earlier this week, the Bank of Canada still sees wage growth as being below what they would expect in an economy without any labour market slack (at least up to this point: this was the second month of >3% wage gains, while the national accounts data reported a 4.9% y/y gain in 2017Q4). It thus seems that the Bank of Canada has set the wage gains of 2007/2008 as their guideline (wage growth at the time exceeded 4%, or more than 7% in national accounts measures). This suggests that today’s solid wage numbers, while welcome, are unlikely to change the Bank’s cautious stance.
