Recent data from Statistics Canada suggests the country's employment situation may be more concerning than many Canadians realize, prompting one prominent economist to call for additional interest rate reductions from the Bank of Canada.
Conflicting Employment Reports
The Survey of Employment, Payrolls and Hours (SEPH) revealed that the number of Canadians receiving pay and benefits from their employers dropped by 58,000 in September. This decline affected 11 out of 20 industry sectors and more than erased a gain of approximately 17,000 positions recorded in August.
This data presents a stark contrast to the more optimistic Labour Force Survey (LFS), which reported a gain of 67,000 positions in October and a decrease in the unemployment rate to 6.9% from 7.1%. The LFS, which is based on household polling, also showed an increase of 41,000 jobs in September.
Economists Question Data Reliability
David Rosenberg, president of Rosenberg Research & Associates Inc., described the situation as "a tale of two employment reports." He noted that the household survey is notoriously volatile and can create a misleading impression of economic strength.
"Payroll is payroll," Rosenberg emphasized. "A survey of households is prone to a wide error term." He considers the SEPH data to be more reliable for assessing the true state of the labor market.
Katherine Judge, an economist at CIBC Capital Markets, supported this view, noting that the payroll survey continues to paint a weaker picture of Canada's labor market compared to the LFS data.
Concerning Long-Term Trends
The recent decline continues a troubling pattern in payroll growth over recent years:
- 5.5% year-over-year growth three years ago
- 2% growth two years ago
- 1% growth last year
- Current data shows employment flat compared to year-ago levels
Rosenberg described the widespread declines across industry sectors as "breathtaking." The losses were particularly notable in interest-rate-sensitive sectors like construction and real estate, suggesting that current borrowing costs remain too high.
Meanwhile, declines in currency-sensitive sectors such as manufacturing and transportation indicate the Canadian dollar may be overvalued. The only sectors showing increases in September were health care, social assistance, and arts, entertainment and recreation.
Statistics Canada also reported that while job vacancies saw a slight increase, the ratio of unemployed people to job openings remained elevated at 3.3, indicating continued challenges in the labor market.
