Business·Analysis

Blip or trend? This week will test Canada's job-creation machine: Don Pittis

Last November Canada recorded the biggest one-month drop in employment since 2009, data showed. This week, we'll find out if it's an economic warning sign or just a blip.

Some experts called doom when the country's job numbers plunged. But there's another view.

A sign advertising available jobs at the Clocktower Brew Pub in Ottawa is shown two years ago. In a tight job market, Clocktower's website says it is again looking for employees. (Chris Wattie/Reuters)

While Canadians were constantly goaded into a state of economic anxiety over the past year, as the dust settled, it was pretty clear the country was coming out of 2019 in a surprisingly healthy state.

Still, at the beginning of December, just when things were going good and following a year of stunning job creation and unemployment near record lows, the twenty-teens closed with a new piece of ominous economic data that led many to wonder whether the trajectory of the Canadian economy had changed.

On the same day the U.S. announced it had cranked out more than 266,000 jobs, pushing unemployment to 3.5 per cent, Canada headed in the opposite direction.

According to Statistics Canada's last Labour Force Survey, the number of Canadian jobs plunged by more than 71,000 — the biggest one-month employment loss since 2009, when the economy was still in the throes of the Great Recession.

Unemployment rose to 5.9 per cent, up from 5.5 per cent in October.

The data was especially shocking because forecasts from economists at the big financial institutions had predicted a net increase of 10,000 jobs.

Staggering losses

As some observers pointed out at the time, with the Canadian population being about 10 per cent of that of the U.S., it was roughly the equivalent of a staggering 700,000 job losses south of the border. On the other hand, as the Wall Street Journal reminded us, Canada's 5.9 per cent unemployment rate would have been 4.7 per cent if calculated using U.S. methods.

The Canadian job decline did not come completely out of the blue. After strong job creation in August and September, October's data also showed a slight drop in jobs.

The question raised by government critics and commentators in the days after the report was whether the new data was somehow a statistical misreading in a data collection system that is notoriously volatile from month to month. Or, alternatively, if something important had changed.

Was it a blip? Or is it a trend?

A truck passes an employee walkway at the GM assembly plant in Oshawa, Ont., where the operation's closure will contribute to a loss in manufacturing jobs in December. (Chris Helgren/Reuters)

A partial answer, at least, will come this week when Statistics Canada releases its final data for 2019 to include the month of December.

As an economic indicator, the Labour Force Survey has some important advantages.

One way of looking at it is that rather than being the proverbial canary in the coal mine, employment data is the actual coal mine. Because what better measure of the economy is there than whether people are working and earning?

Employment data is about the closest we have to a reading of now. Gathered through public interviews of households in days before its release, the Labour Force Survey takes the current pulse of the economy in a way other data cannot.

But that immediacy comes with some flaws.

Room for error

"While we are confident in our methodology, there is variability in the Labour Force Survey estimates, reflecting the nature of the survey," explained Statistics Canada labour market economist Bertrand Ouellet-Léveillé.

Statisticians understand this in a way that most of us do not. But even with a big sample size, there remains large room for error.

To a statistician, there are about two chances out of three that jobs losses were in a wide range around the minus 71,000 figure, Ouellet-Léveillé said. But there is a one-third chance it is wrong altogether.

That's why data for a single month should never be read alone, he said, and why it should be used with other sources of information, such as job vacancy and wage data.

Despite signs of an otherwise booming economy, Statistics Canada said Quebec alone lost more than 45,000 jobs in November due to a fall in manufacturing, accommodation and food services. (Christinne Muschi/Reuters)

Certainly, business leaders have consistently complained that they have hundreds of thousands of jobs still vacant. And wages, rising at 4.5 per cent, or double the rate of inflation, seem to indicate workers remain in demand.

Some blamed the size of November's job slump on public-sector workers who were no longer needed after the fall federal election. A sharp drop in manufacturing jobs is more ominous, but with demand high, both groups may soon be drawn back into the workforce.

And then there's inflation. Shortly after that last jobs release, rising prices told a completely different story for the Bank of Canada and the Canadian dollar.

When those jobs numbers were released a month ago today, many analysts took it as a warning that the economy was in trouble. "Biggest jobs loss since 2009 test Canadian resolve on rates," blared a headline from the business news service Bloomberg.

The Canadian dollar fell.

Top 10 and rising

Many saw the plunge in employment as a sign that the Bank of Canada would have to cut rates to boost the economy. But now a month later, almost no one thinks Canada's chief central banker Stephen Poloz, or his replacement, taking over in June, will cut interest rates in 2020.

Not only did the dollar begin to rise after the recent inflation numbers, most Canadians would probably be surprised to learn that the loonie was one of the developed world's powerhouse currencies in 2019, beating out the U.S. greenback by five per cent.

Many other indicators tell us that Canada remains strong. Just last week, the World Economic League Table showed that not only has the Canadian economy knocked out South Korea to once again make it into the global Top 10, but in the coming decade, Canada is expected to climb over the backs of Italy and Brazil to reach No. 8.

"Despite the fact that the economy is doing reasonably well, with some regional exceptions, [and] despite the fact that the Canadian middle-class income has been better and more stable than most middle classes around the world at the moment … there is a kind of anxiety out there," Keith Banting, a public policy specialist at Queen's University, said in an interview last September.

Last month, Conservative warnings of a made-in-Canada recession helped keep that anxiety alive. And while most domestic and international analysts say the Canadian economy will continue to grow in 2020, a November slump in employment that expands from a blip into a downward spiral would be dangerous signal.

So was it a blip? Or is it a trend? This week's employment statistics will help settle that debate.


Follow Don on Twitter @don_pittis

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.

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