E Canada Recorded A Massive Surge Of New Jobs In May

“Adjusted to the concepts used in the United States, the unemployment rate in Canada was 5.6% in May, compared with 4.3% in the United States. In the 12 months to May 2017, the unemployment rate fell by 0.3 percentage points in Canada and by 0.4 percentage points in the Unites States.” (Statistics Canada Labour Force Survey, May 2017.)

The Canadian economy has been struggling in recent years because of low oil and commodity prices and large international trade deficits.

Despite the energy bust, however, Canada’s industries posted strong production gains over the past twelve months. An aggressive federal fiscal policy, a housing construction boom, and a weaker Canadian dollar has helped to turn matters around. Canada’s real GDP expanded at a 2.7% annual rate in the fourth quarter of 2016 and at a 3.7% pace in the first quarter.

As the following table and chart suggest, the Canadian job market may be finally catching up with the improving economy.

Full-time Canadian employment rose by 77,000 jobs in May, and at the same time, the economy shed 23,000 part-time jobs. In total, Canada’s economy created a massive 55,000 jobs in May.

Both manufacturing and service sector jobs expanded in May, though the unemployment rate increased.

The unemployment rate increase was entirely due to an increase in the labour force participation rate to 65.8% from 65.6% in the previous month.  The employment gains were very widespread across the provinces and clearly the huge monthly gain was very impressive.

Average hourly wage earnings jumped up in May to 1.3% (y/y), but are still extremely low on a historical basis. But as one of the charts indicate, wage gains are very volatile, and usually escalate quickly when the job market tightens.

Finally, a serious cautionary note. When Statistics Canada undertakes its sample of households, there usually is a large experimental error around these statistics. Consequently, one should expect some significant moderation in Canadian job growth in coming months. 

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