Weekly Economic Watch -September 09, 2013‏

– Employment rose 59.2K in August according to the Labour Force Survey. That was well above consensus expectations which were at just +20K. The job gains were so strong that the unemployment rate managed to drop one tick to 7.1% despite the increase in the participation rate to 66.6%. There were job gains in both public (+9K) and private sectors (+31K) bringing paid jobs up by 40K. That said, paid employment remains below June levels. Most of the job gains were in the services sector (+40.6K) with strength in health care, info/culture and accommodation more than offsetting declines in education, finance/insurance and others.

The ranks of the “self-employeds” increased 19K. Most of the job gains in August were, however, part-time (+42K), with full time employment rising just 17K (i.e not making up for the prior month’s slump). But the overall job gains were so strong that total hours worked rose 0.4%. At the provincial level, gains were concentrated in Ontario (+43.6K), Alberta (+15.2K) and British Columbia (+6.2K); while Quebec and Manitoba registered job losses of 4.9K and 3.1K respectively. The Canadian Labour Force Survey continues to show volatility. August’s strong report comes after a dismal July, and so one needs to look at the results in context. Such is the volatility that we prefer to look at the 6-month moving average which shows employment growing at an average pace of 12K/month, with a heavy tilt towards self employeds (+10K) and part-timers. The picture is worse if we look at the 3-month moving average. So, the Canadian labour market is far from booming. With August’s gains, hours worked are tracking 1.5% annualized, picking up from Q2’s pace of 0.2% but nonetheless still consistent in our view with another sub- 2% growth performance for GDP.

In July, the merchandise trade deficit widened to C$0.9 billion from C$0.46 the prior month. This flew in the face of consensus, which had expected the gap to narrow to C$0.3 billion. The deterioration was due to a drop in nominal exports (-0.6%) and an increase in nominal imports (+0.6%). Exports declined in several categories, including aircraft equipment, which registered a notable 22.8% slump. These more than offset increases in forestry, agriculture, autos and energy. The energy trade surplus grew to C$5.7 billion, its highest mark since January 2012, while the non-energy trade deficit swelled by more than C$1 billion to C$6.7 billion, its worst showing since November of last year. The drop in exports was due entirely to volumes. In real terms, exports sagged 1.2%. Real imports, for their part, rose 1%.

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