It’s Jobs day, and the numbers on both sides of the border soared past expectations. Canada added 34,500 jobs in January, more than twice the forecast of 15,000. The U.S. gained 225,000 jobs, blowing past expectations of 160,000 jobs.
As we digest the latest data, let’s take a look back at what turned out to be a banner year for Canada’s job market, and what it tells us about what’s to come. TD economists Brian DePratto and Rishi Sondhi in a recent report found some interesting details lurking beneath the headlines.
• The 320,000 net jobs gained in 2019 was the second biggest rise since the recession. But most of the job growth was in the first half of the year, which saw an average of 41,000 jobs per month, only to drop off to 12,000 a month in the second half.
• Geography mattered, with Ontario leading the way. TD said Ontario was a strong performer in the first half, only to become almost the sole driver of jobs later in the year. Toronto and Ottawa accounted for 90% of the job gains in the province.
• What kind of jobs? Public sector made up 20% of the jobs in the first half, but this rose to 70% in the second half, as “private hiring slowed to a snail’s pace — hardly a positive signal.”
• What about wages? Average hourly earnings climbed at their fastest pace in a decade last year, TD said. The tight labour market is part of the reason, but also the jobs being created tended to be higher paying. Curiously, earnings for younger workers leapt 6% last year, almost twice the overall gain.
• Hours worked, however, didn’t reflect the hiring, with total hours slipping slightly over the year. A big drop in Alberta and other oil provinces accounts for some of that. The economists suggest also that older workers may have chosen to work fewer hours. “Whatever the reason, the decline in hours dulled the impact of robust hiring on GDP growth.”
• Canada’s participation rate for workers aged 15-54 hit a record last year. TD says Canada beat the United States on this metric, helped by our strong performance by women in the workforce. The participation rate of older workers, over 55, also hit a new high.
• What kind of jobs? Nearly 6 in 10 jobs were in education, health and social work or public administration, with employment in these categories hitting a record high. Oddly there was also a gain in retail jobs, considering the challenges facing that sector. Growth in science and technology neared levels seen in the late ‘90s tech boom. Manufacturing on the other hand saw a decline.
What’s ahead? TD expects the subdued hiring pace seen in second half is most likely what will continue in the year ahead, and this fits with what their economists expect will be a lacklustre year for the economy. “That’s not necessarily a bad thing — a labour market churning out 10K to 20K jobs per month on trend basis should be sufficient to keep the unemployment rate near its current level and support solid wage gains,” said DePratto and Sondhi.