logo
loader
         
0/5

Like what you see? Subscribe to our mailing list to get our newletters when released.

  • KPB & Co Research

Statistics Canada released its April 2019 labour force survey today, and it shows positive short term developments in the Canadian economy, especially within the context of slowdown economic growth growth in the back half of 2018. Employment rose 107k in April 2019, and 426k over the last 12 months, pushing the unemployment rate down to 5.7%. This is certainly positive news on a short term basis, upon dissecting the growth in employment it became clear that a substantial portion of the growth in jobs came from the services sector, while manufacturing and Natural resources sectors still remain in the doldrums.



Services Lead With Warehousing & Transportation

Goods

It is very difficult to ascertain trends from the month to month comparison of employment data because of its volatility, but the 12 month comparison (April 2018 to April 2019 ) shows that employment in the goods producing sector grew by approximately 1.4%. Within the goods producing sector, the strongest growth came from construction with a 2.2% increase in employment over the period. The growth in construction employment is somewhat surprising given that Housing starts for the first quarter of 2019 is running at an annual rate that is 13% less than the annual run rate this time last year. Keep in mind that 2018 Housing starts was down 3.1% relative to 2017. It is quite likely, that the growth in construction came from work on done on public infrastructure such as roads, bridges, hospitals and community centres and may have been part of the government's infrastructure program highlighted in the 2019 Budget. The second strongest growth came from the Agriculture sector. The agriculture sector has been holding up quite well in the midst a trade dispute with the USA, and China. At the same time the sector has been benefiting from the suite of government support that has been provided together with a trade deal the European Union.


The Manufacturing, and Natural resources - forestry, fishing, mining, quarrying, and oil and gas extraction - sectors remain sluggish, with 0.5% and 1.8% growth respectively. Natural resources have benefited slightly from an improvement in commodity prices globally, key of which is oil prices that have increased significantly since the Q4 2018, but still remain below levels seen in the fist half of 2018. Employment growth in the natural resources sector will likely be hampered by continued lack of pipeline capacity. Perhaps even more concerning is the fact that manufacturing sector has been in a sluggish state for years, which likely reflects long term structural competitiveness issues. It is well known that key companies in this sector, particularly OEM manufacturers have been having tough time handing competition from Asia, and the changes that technology and the electrification of cars have been lead to.

Services

Employment in the services sector grew by approximately 2.5% over the last 12 months. Within the services sector there are a few sub-sectors with above average (2.5%) growth in employment and a few below. First, transportation and warehousing leads with 5.2% growth, which is the highest of all the sectors. The growth in this sector reflects not only the movement of goods for Canadian retail purposes, but also transhipment goods moving to or from other countries going to or from either the USA or Mexico. After all the manufacturing sector remains soft, retail remains quite a large group of people in-spite of all the bankruptcies that have taken place, and the wholesale and retail trade sector grew by 2.7%. Professional, scientific and technical services; Business, building and other support services; public administration; and Educational services all recorded employment growth that was significantly above average.


In light of the soft growth in employment for the goods producing sector, we think that the high growth service sectors are likely sectors that are supporting either the Canadian government or international businesses - possibly business in emerging markets where most of the manufacturing is being done. Employment in public administration and Business, building and other support services both grew 4.2%. Professional, scientific and technical services grew 4.3% which is very impressive given that these are likely high skilled jobs, and they are quite a large group of people.


All the other service sectors either declined substantially or had increases that were very close to the average. The biggest decline came from the Accommodation and food services, with a 2.7% decline. The Health care and social assistance group is a very large group of people, and the number of employment grew by about 2.1%.


Recent employment trends reflects a continuation of trends that we have seen in many developed countries, where the good producing sector is becoming silent, and the service sector is growing. Up until recent times, this trend was ok. The perspective of policy makers was that countries should stick to sectors where they have a distinct comparative advantage, and so if goods production is not your thing, you should focus on services. In recent times however, there have backlash from the millions of displaced workers who have not been re-trained to thrive in a service based economy. These workers have voted for BREXIT and Trump policies which has left many people stunned, maybe in the years ahead economic policies will be more supportive of good producing sectors or more training.


You may also like