- Employment fell with soft details
- Chosen SA factors exaggerated the weakness
- BoC is more focused on a negative terms of trade shock than last month’s jobs
- Canada employment, m/m 000s // UR %, SA, March:
- Actual: -32.6 / 6.7
- Scotia: 25 / 6.5
- Consensus: 10 / 6.7
- Prior: 1.1 / 6.6
Whoops, we all blew that one. Then again, the decline was fudged in my opinion. Nevertheless, it still doesn’t matter in the face of the changed world we now have upon us with the trade war.
Canada ‘lost’ about 33k jobs last month. The details were weak (chart 1). Ontario, Alberta and Quebec drove the loss.
Full-time jobs took it on the chin at –62k with part-time jobs up about 30k.
Private payroll jobs fell 48k with public sector payroll jobs little changed (-3k) and self-employed jobs up 18k. I’m always skeptical toward self-employed positions not due to their nature but due to the soft data quality with self-reporting and what a sudden pick up indicates amid mounting risks to the economy.
By industry, the retail and wholesale trade sectors took the biggest hit at about –29k jobs following the end of the GST/HST cut and as significant retailers stumble. Other sectors were more balanced in terms of gainers and losers (chart 2).
Hours worked are a better indicator of incomes for many but they only gained 0.4% m/m SA after a steep drop of –1.3% in February. Q1 hours worked were up by 2.0% q/q SAAR which is a positive reading for GDP growth with GDP defined as hours worked times labour productivity (chart 3). Weather helped, as the lost hours worked due to weather in February (think snow...a lot) fell back to closer to seasonal norms (chart 4).
Wage growth stalled at just 0.1% m/m SAAR in March, but this followed a jump to 6% the prior month (chart 5). Still, the three-month moving average is just 2.3% m/m SAAR.
Here’s where the rub comes in. Statcan applied the lowest seasonal adjustment factor on record for months of March to the job figures (chart 6). Doing so worsened what was little changed in the seasonally unadjusted drop of –11k. Chart 7 shows what job growth would’ve looked like across a sampling of SA factors drawn from the history of other months of March. Most of them would have generated a gain in jobs.
As for the Bank of Canada, I don’t think they will much care about these jobs numbers including the SA factor distortions. For one thing, it’s just one number, although the prior month was soft as well and with weather and SA factors also weights in February. What will carry the day is that the trade shock is much bigger than anyone anticipated—especially those who felt the BoC would keep cutting but that tariffs would never materialize! Reasons matter.
For a modestly sized, open economy that trades a lot and is commodity dependent, these are bad developments. It’s a negative terms of trade shock to which the BoC tends to respond dovishly. Look at oil, for example. Plus, Canada's retaliation is less than the US tariffs, hence not dollar for dollar, and so the impact is a net demand shock through the two-way trade measures. And the US economy is going down here which is never good for Canada especially given commodity hits.
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.