Weekly Economic Watch

– Employment rose 12K in September according to the Labour Force survey. Despite the relatively small gains in employment, the unemployment rate managed to drop two ticks to 6.9%, the lowest since 2008. That was because the participation rate fell two ticks to 66.4%, the lowest since 2002, largely due to the youth. There were strong gains in employment in the private sector (+74K), which more than offset the 16K drop in public sector employment. Paid-employment rose 57K, while the ranks of the “self-employeds” fell 45K. All of the job gains were in the services sector (+22K) with strength in trade, finance, real estate, which more than offset declines in health care, professional services and accommodation. All of the job gains in September were full-time (+23K), which offset the decline in part-time (- 12K). But interestingly, total hours worked fell 0.2%. On a 6-month average basis (which is what we like to use considering the LFS’s volatility in recent months), Canada created on average 23K jobs/month, all in the private sector and mostly full-time. So, the LFS is indeed painting a rosy picture of the labour market. Government cut 81K jobs in Q3, the biggest quarterly purge on record.

Thankfully, the private sector more than offset this with a net 136K jobs being added in the quarter. Self employment was down in the quarter. The net 32K jobs created in Q3 come after a 107K increase in the prior quarter. Hours worked grew 1.5% annualized in Q3, picking up from Q2’s pace of 0.2%.

Housing starts rose 5.3% to 193.6K in September from an upwardly revised 184K the month before, topping consensus expectations, which had been set at 185K. The increase was split between rural (+17.1%) and urban areas (+4.3%). In urban areas the advance was driven primarily by multiples (+5.9%), although singles progressed a little as well (+1.4%). On a regional basis, urban starts were up in B.C. (+17.4%), the Prairies (+24.7%), Quebec (+5.9%) and Atlantic Canada (+29.8%), more than offsetting a 15.6% pullback in Ontario. Though results were stronger than expected for the month, growth in housing starts on a quarterly basis decelerated sharply to 3.8% after surging 39% in Q2. Single-family starts fell 5.9% annualized in Q3 after jumping 12% the previous quarter, while multiple-unit starts gained 13.8%. Given that the former contribute more per unit to GDP than the latter, residential construction could end up being a drag on GDP in Q3.

In August, building permits contracted 21.2% in dollar terms basically erasing the prior month’s gains (21.4%). The decrease in the value of permits was attributable primarily to the non-residential sector (-37.9% with all subcategories down). The decline in residential permits (-5.4%) was split between singles (-3%) and multiples (-8.3%). In real terms, residential permits retreated 0.7% as a 3.4% drop for singles more than offset a 0.8% jump for multiples.

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