Why June's jobs picture appears grimmer than first thought
OK, I think it's pretty well-established now: June wasn't a great month for Canada's labour force. And it probably wasn't a good month for economic growth as a result.
Another key indicator rolled in Wednesday morning, with Statistics Canada's monthly Survey of Employment, Payrolls and Hours (SEPH). The report showed that Canada lost 3,600 jobs in June – a bit worse than the tiny 400-job decline in the June labour force survey (LFS). In addition, the average weekly hours worked slipped 0.6 per cent, to 32.9 hours from 33.1 in May, although average weekly earnings climbed 0.2 per cent to $919.
Unlike the mainstream-headline-grabbing monthly labour force survey, which is essentially a poll of a relatively small sample of Canadian households, the SEPH is derived from a combination of a survey of employers and the actual payroll data submitted to the Canada Revenue Agency by companies. Economists generally consider it a more complete, accurate and reliable reading of Canada's labour market. (Consider that the margin of error in the June labour force survey was a hefty plus-or-minus 57,400 jobs, 19 times out of 20.) The labour force survey does have a big advantage in terms of timeliness, though; it's typically released within a few days of the end of each month. Still, both reports, at least on their surface, suggest a stalled job market in June.
But considering the considerable impact of the Quebec construction strike and the Alberta floods in the month, maybe these numbers aren't so discouraging. After all, Quebec had the biggest job decline among provinces in June (down 13,200), while Alberta's normally powerful job-creation engine managed to add just 1,200 positions in the month, less than one-third of its average over the past year. Both provinces reported declines in hours worked that exceeded the national average.
We don't know specific details about how many worker-hours were lost to the Quebec strike, but on Tuesday Statscan did give us details on the Alberta flood impact. Alberta workers, it said, lost a net 5.1 million hours of work due to the floods in the second half of June. A quick calculation indicates that Alberta's flood-related losses represent roughly 0.25 per cent of the total hours worked in the country in the month. While we're only guessing at the depth of the impact of the Quebec strike, it's probably safe to say that these two transitory events accounted for the bulk in the country's hours-worked and total employment slowdown.
But regardless of the causes and their apparent short-term nature, the numbers still point to labour-market weakness that certainly contributed to a sluggish Canadian economy in June. CIBC World Markets economist Emanuella Enenajor said in a research note that the numbers are "consistent with our call for a 0.6-per-cent decline in output that month" – which would be a pretty sizable setback for growth.
National Bank Financial senior economist Krishen Rangasamy said in a research note that with the June data, the SEPH indicates a 4,000 net decline in Canadian jobs over the entire second quarter – in stark contrast to the 111,000-job increase that the labour force survey has generated for the quarter. The SEPH decline is more consistent than the LFS is with consensus estimates that gross domestic product (GDP) growth slowed to an annualized pace of about 1.5 per cent in the quarter, compared with the first quarter's 2.5 per cent. Mr. Rangasamy noted that the SEPH has had a much closer correlation with GDP trends than the LFS has over the past several quarters.
(Statscan will release the June and second-quarter GDP figures on Friday morning.)
On the other hand, Mr. Rangasamy said the SEPH's rise in average weekly earnings in the second quarter was a brisk 3.6-per-cent annualized pace – compared with essentially flat wages in the first quarter. That represents ample supply of new pocket money to fuel an acceleration of household spending in the quarter – offering some potential upside to the second-quarter GDP expectations.