Canadian employment rallied back in August with 34,300 jobs created more than reversing the 30,400 drop in July. Forecasters looked for an increase of 10,000 in the month with RBC Economics slightly more optimistic and forecasting at gain of 21,000. The unemployment rate held at 7.3% as the labour force grew by 30,500.
On an industry basis a surge in service sector hiring (+70,600) was tempered by a 36,400 decline in the goods-producing industries. In the goods sector, construction employment dropped by 44,000, the biggest drop since December 2008. The number employed in the construction industry remains historically high though recent declines have resulted in 30,000 less jobs than in August 2011. Manufacturers clipped another 2,700 positions in August, following declines of 18,400 in July and 800 in June. Despite these consecutive declines, manufacturing employment is up 93,000 from its November 2011 low.
In the services sector, gains were sprinkled across most industries with the larger increases in transportation and warehousing, professional and business services and wholesale/retail trade. Declines in information and cultural services, finance, insurance, real estate, and health care moderated the monthly rise. Jobs in educational services posted a 3,200 rise in August marking the fifth monthly increase in a row.
The split between full-time and part-time jobs favoured part-time this month although in the 12 months ended August 2012, full time employment was up 172,000 while part-time jobs posted a much smaller 4,300 gain. Average hourly wages for permanent workers were up 3.7% in August compared to a year earlier, slightly slower than July's 3.9% pace which was the fastest since March 2009. The number of hours worked fell by 0.3% in August, although this was the first decline in nine months.
On a regional basis, increases were recorded in Quebec, B.C., Manitoba and Saskatchewan. Ontario lost a whopping 25,000 jobs in August following July's 10,600 gain. Year to date, Ontario still generated 14,600 jobs. Ontario's unemployment rate edged up to 8.0% from 7.9% in July.
Canada's labour market regained its step in August after an unexpected drop in employment in July. Notably, the employment data have been very volatile however looking through the volatility the economy generated an average of almost 20,000 new jobs per month so far this year. Furthermore, jobs created in 2012 have been full-time with part-time employment only up marginally. All told, Canada's labour market is in good shape although if the weaker trend rate in job creation over the past four months persists (average monthly increase of just 4,700), this could jeopardize the strengthening in economic activity that we expect.
Canada's economy grew at a 1.8% annualized rate in the second quarter despite a myriad of special factors that conspired to limit output in the quarter. Our forecast is for a strengthening in the pace of growth in the third quarter as these one-off factors reverse with the monthly GDP data indicating a strengthening trend going into the quarter. The sustainabililty of the pace of job creation will be impacted by businesses' assessment of the risks that global developments present.
This week's European Central Bank announcement helped shore up optimism that a solution to the area's problems may be in the pipeline however today's report of a smaller-than-expected gain in U.S. payrolls is keeping concerns about the U.S. economy front and centre. For Bank policy, today's data reinforces the view that the domestic economy is doing fine and that the risks to the outlook continue to come from outside Canada's borders. This supports the case for the Bank to hold the policy rate steady at 1.0% for the remainder of this year with an eventual reduction in policy support likely to materialize once these external risks have dissipated.
