Canadian Labor Market in August Better But Still Weak

September 5, 2008

Canada’s jobless rate held at 6.1%, and employment rebounded 15.2K, which exceeded consensus expectations.  Hourly wages rose 3.8% from August 2007, the first sub-4.0% result since July 2007.  The increase in jobs followed a stunning 55.2K plunge in July and a 5.0K decline in June, and such left annualized employment growth over the past four reported months at -0.6%.  Moreover, jobs in the all-important service sector rose merely 0.4K after declines of 37.3K in July, 5.4K in June and 20.2K in May.  Private employee growth of 40.9K offset less than half their 95.3K dive in July.  The most vibrant job growth was in construction, up 18.5K after a 10.3K increase in July.  Canada’s jobless rate has not risen as sharply recently as its U.S. counterpart despite slower GDP growth than its neighbor.  The lowest recent unemployment rate was 5.8%, seen only in February.  While wage growth is subsiding, such remains nearly one and a half percentage points above consumer price inflation, a gap that cannot be justified by productivity advances.  With commodity prices in quick retreat and clouds still overhanging the U.S. economy, Canada faces several more difficult months.  Between December and April, the Bank of Canada sliced 150 basis points off its overnight rate target to 3.0%.  Support from that relief should begin to trickle down in the final quarter of this year, but 3.0% remains 100 basis points higher than the U.S. Fed funds target despite much lower inflation in Canada than the United States.

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