Canadian Labor Market Hit By Big Loss of Construction Jobs

January 9, 2009

A 44.3K plunge in construction jobs accounted for the entire 34.4K decline in Canadian employment last month. The 34.4K decrease was over 50% greater than expected and followed an outsized 70.6K decline of employment in November. Job losses in the last two months of 2008 were akin to a 417K monthly pace of decline in the U.S. labor market. Previously high-flying Alberta accounted for almost half of December’s job losses. Canada’s unemployment rate rose three-tenths to 6.6% in December but has advanced less than one percentage point from a 5.8% cyclical low in January-February of 2008. Young workers were particularly hard-hit in December, and full-time workers dropped by 70.7K on top of a 32.4K decrease in November. Wage pressures remained surprisingly resilient, recording a 4.3% increase in the year to December, well above the 2.0% most recent rate of CPI inflation. Canadian jobs advanced just 0.6% in the year to December, little more than a fourth as much as the 2.2% increase in the twelve months to December 2007.

Not all aspects of the labor data were bad, however. At least jobs remain higher than a year ago. U.S. employment, by contrast, fell in every month of 2008, and the U.S. jobless rate has already increased over two percentage points from a cyclical low of 4.4% and is likely to have a 7-handle this month. Also, factory jobs in Canada went up 8.9K instead of falling as assumed. But trends are clearly deteriorating and will get worse. Having resilient wage growth is not so bad in a deflationary world environment.



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