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Canada’s Job Market Showed Unremarkable Peformance in October

Statistics Canada released its latest Job Market on November 2nd, and it shows that Canada’s economy only created less than 18,000 jobs in October. Virtually all were government-funded jobs, while private sector employers actually let more people go than they hired. The 18,000 new jobs were not enough to move the unemployment rate, which remained unchanged at 7.4% . While this performance came after two months of more convincing employment growth, it makes it hard to predict where the job market will go from here. Vicinity Jobs recorded a strong hiring demand in October and this may lead to a better job market performance in November. But the uncertainties persist.


The number of Canada’s public sector employees grew by 37,000 in October, while private sector employers shed 19,000 jobs. This is not really surprising, given that over the past 12 months, the number of private sector jobs has grown by only 1.4%, whereas the public sector has recorded a stronger 2.1% employment growth. This is a concern because growth cannot continue to be fuelled by the public sector in the current economic environment. With the federal and most provincial governments running budget deficits and with little appetite for a new economic bailout, the prospect of a sustained hiring spree by government employers is slim. Any sustainable job market growth must come from the private sector.

The job market trends differed between Canada’s provinces. Almost all new jobs were created in Quebec and Newfoundland. The job losses were in British Columbia, Manitoba, and Ontario. BC and Manitoba have unemployment rates well below Canada’s average, and both have outperformed most of Canada in the past year. Although BC lost about 11,000 jobs in October, its unemployment rate still sits at an enviable 6.7% compared to Canada’s average of 7.4%.

The picture looks different in Ontario: In the past years, Canada’s most populous province has been struggling to recover from the declines in its manufacturing industries. Ontario’s unemployment rate was already at 7.9% at the beginning of the month. After another 10,000 jobs disappeared in October, unemployment in the province has now reached 8.3% – almost a full percentage point above Canada’s average.  

One brighter spot in October’s report was the fact that the jobs that were created were actual employment jobs, whereas self-employment declined. This is good news because many of the so-called “self-employment” jobs are actually low-paying part-time positions which people pursue due to the lack of other opportunities. In times of strong economic performance, employment growth tends to outperform self-employment growth.

Another brighter spot was the fact that the manufacturing sector actually continued to create jobs, and produced a 5% employment growth for the past 12 months. But at the same time, another key industry that usually creates good quality well paying jobs has been shedding jobs: Employment in the professional, scientific, and technical services industry dropped 2% over the past year.

So what’s next?

The Vicinity Jobs hiring demand index recorded strong hiring demand from Ontario’s employers in October. It was only slightly weaker than August’s performance, and might lead to an improvement in November’s numbers.

The US job market report for October (released on the same day as Statistics Canada’s report) and some other US economic performance reports released in recent weeks seem to point to an improvement in the US economy. This matters because the US is Canada’s largest trading partner and connections between the two economies run deep. The US, for example, is still the largest market for Alberta’s oil. But the good economic news from the US may turn quickly if the US government fails to avert the fiscal cliff that the US economy is facing at the start of 2013 (If the US politicians fail to reach an agreement on taxes and government spending cuts, significant spending cuts will go into effect automatically, with potentially disastrous impact to the economy). And the devastation from Hurricane Sandy is likely to hurt the US economic performance somewhat in the remaining 2 months of this year.

The European economic crisis is far from over too – even though there have not been many economic news from Europe in the past month. Growth in the world’s larger developing economies (China, India, Brazil) remains slower than it was a couple of years ago.

In Canada, the housing market remains slow. But prices have not declined significantly yet, and this is feeding hopes that Canada’s real estate market will experience a soft landing that will be less harmful to the economy than a US-style meltdown. Nonetheless, the debt of Canada households remaining at record highs, making Canadians and our economy more vulnerable to potential interest rate hikes or foreign economic crises (like the one in Europe). The only way to reduce debt is to spend less, and less consumer spending means less demand for consumer goods and services, which in turn means less potential revenue for Canadian businesses. At the same time, high debt levels leaves less or no room for additional borrowing to bridge a potential economic downturn.

Canada’s employers seem to be concerned about all this – so they are taking a “wait and see” approach and postponing hiring decisions. It is unlikely that we will see significant growth until the risks start getting mitigated.