The March 2008 Canadian employment numbers have just been released by Statistics Canada. How do the latest figures match up against the two key benchmark measures as set out at the bottom of this report?

Results: Some softening has appeared in the labour market figures for March 2008 as reported by Statistics Canada today. Year-over-year job growth has slipped to +1.9% and the month-to-month increase in the number of jobs is a modest +15,000. However, both of theses figures compare relatively well with the benchmark numbers as set out at the bottom of this report.

The unemployment rate has risen slightly in the latest month to 6.0% from 5.8% the month before. Year-over-year manufacturing job growth is -5.6%, but year-over-year employment in construction has shot up to +9.5%. The figure for construction is the highest in this cycle. Both residential and non-residential construction activity are performing well. Non-residential building work is a lagging indicator in terms of general economic cycles. There has to be a long record of good profit growth and higher utilization rates (in offices and plants) before firms will undertake major capital investments.

Full-time employment growth remains strong at +2.1% year over year, while part-time employment has dropped to +1.1%. However, many of the new jobs are coming in the public sector, +5.8%, while employment growth in the private sector is now only +1.0% on a year-over-year basis.

One worrying statistic in the latest report concerns compensation. The year-over-year increase in average hourly wages remains high at +4.7%, which is more than double the overall inflation rate of 1.8%.

There are indications of weaker labour markets to come. The latest survey of hiring plans by Manpower Inc. showed a decrease in the number of firms planning to add staff. This was across all regions and according to almost all industrial sectors. (See separate report.)

Despite the foregoing, the Canadian economy remains somewhat distanced from the problems in the U.S. thanks to a “trifecta” of good news: (1) low prices (due to the high-valued Canadian dollar); (2) low taxes (e.g., the cut in the Goods and Services Tax); and (3) low interest rates, thanks to action taken by the Bank of Canada.

The March 2008 U.S. labor market story has also been released today. See separate blog entry. 

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

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