According to the latest labour force numbers released by Statistics Canada, it’s great to be working in construction these days, but not so wonderful if your employment history has been in a factory. Total Canada employment growth in April 2008 was +19,000 jobs on a month-to-month basis. The year-over-year job growth rate was +2.0%. Both of these figures exceeded the benchmark levels set out at the bottom of this report. The conclusion can only be that the labour market remains strong in Canada as a whole, at least for the moment.

Since the beginning of this year, construction (+67,000) has provided more than half of all the new jobs (+123,000) in the country. Manufacturing, on the other hand, has seen a further erosion of employment by 31,000 jobs since the end of 2007. Year-over-year production-line employment has declined by 113,000 jobs. Half of those job losses have been in Ontario.

The high-valued Canadian dollar has been a factor in weak manufacturing employment. Additionally, auto demand within the United States’ own domestic market has faltered, requiring fewer cross-border shipments. Quieter housing markets, especially in the United States, but now also creeping across Canada, are also playing a role, since so much of goods production is geared towards the homeowner.

Interest rates in both the United States and Canada have probably been lowered about as far as they can go. The concern about inflation, sparked by high food prices around the world, has become too prevalent. This will limit the stimulus that can be applied to the economies of both countries going forward. The cycle will be allowed to take its course.

Wage earnings are contributing to the unease on the price front. Average hourly wages in Canada are now up 4.3% versus last year. This is well ahead of the latest inflation rate, which clocked in at only +1.4%. The wages-inflation comparison in the U.S. is the reverse of Canada’s, with the rate of increase in the general price level (+4.0%) outpacing the hourly earnings gain (+3.4%). The weak U.S. economy has constrained labour’s bargaining capacity, while the drop in value of the greenback has caused the price of energy and other imports to shoot upward.

Services-providing employment (76% of the total) in Canada continued to grow at a strong +2.5% pace year over year in April. The strongest sub-sectors in services were: public administration (+9.3%); professional, scientific and technical services (+8.2%); transportation and warehousing (+3.7%); and business, building and other support services (+3.0%).

Provinces in the West have unemployment rates of 4.3% or lower while those in the East begin at 6.3% and move higher. Year-over-year employment growth is better in the West, topping out at +3.4% in British Columbia. In the East, one of the poorest records on employment growth was turned in by Québec (only +0.7% ahead of last year). Québec, relative to the rest of Canada, went through a period of catch-up growth in 2007. However, that forward momentum appears to be stalling.

(Please see related Market Insights story, with graphs.)

Two Key Benchmark Measures: There are two benchmark figures to target with respect to Canadian employment: (1) +1.5% year-over-year job growth; and (2) +17,000 as the long-term average increase in the month-to-month number of jobs. As long as these targets are being approached or exceeded, it is hard to say too much negative about the Canadian labour market.

If the latest figures fall short, the economy may still be okay as long as some other key indicators are positive. However, if the latest figures fall short and there are other indications of slowdown, then warning signs start to flash about overall weakness in the economy. Job growth leads to income growth, which drives consumer spending (55% to 60% of Canadian Gross Domestic Product).

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.

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