CANADA: Employment increased 19K in March according to the Labour Force Survey. However, this did not prevent the jobless rate from rising one tick to 6.7% as the participation rate increased to 65.9% from 65.8%. The increase in March employment was mostly due to selfemployment (+18.4K) while paid jobs (+1K) remained essentially unchanged. Among paid jobs, the private sector posted a 14K gain while government (-13K) registered a decline. The goods sector rose by 22K while the services sector (-3K) experienced a slight decline. Full-time employment was up 18K, while part-time employment edged up 1K. The Canadian labor market continued to beat expectations in March (for an 8th consecutive month!) with a very decent gain. As a result, headcounts increased by a whopping 276K jobs over the past year, tilted towards fulltime and in sectors generally recognized for higher salaries.
We recently argued that the Bank of Canada’s narrative about the weakness in total hours worked was misplaced. At the time, we pointed to the disconnect between full-time employment and total hours worked (a 4-standard deviation divergence from the mean) and argued that hours could be on the cusp of a rebound. The March employment report showed just that: total hours jumped 1.1% on the month, the biggest monthly increase since Canada emerged from recession in 2009. Total hours now stand at a new all-time high. Despite the rebound, there is still a two-standard deviation divergence between the level of hours and full-time headcounts which incidentally surged by the most in a decade in Q1 2017. In other words, hours are likely to continue catching-up to jobs in the coming months, even more so now that employment creation in Alberta is resuming: the province boasted its biggest quarterly increase in full-time positions in nearly two years in Q1 2017 (16K jobs). With labour market conditions tightening (the employment/population ratio for prime-aged workers is at an all-time high), with GDP growth running above potential in Q4 2016 and Q1 2017 and with home prices surging, we think that it is time for the Bank of Canada to acknowledge that the economy is doing better than expected. We see the odds of rate hike in 2017 rising significantly.
To read the entire report Please click on the pdf File Below