Banks on the Labour Force Survey

When the Canadian Labour Congress comments on the Labour Force Survey, the interests we represent and the policy agenda we hope to advance is quite explicit. When banks comment, they are generally treated as neutral observers. However, banks are powerful economic actors with major economic interests.

In April, full-time, paid jobs disappeared, unemployment rose and people withdrew from the labour force. Today’s Globe and Mail reports:

“Longer term, this soft report hardly detracts from the bigger picture of a very healthy job market, with a very low jobless rate,” said Douglas Porter, deputy chief economist at BMO Capital Markets, in a note.

Wages are starting to creep higher as the labour market tightens and that could put some pressure on the Bank of Canada to raise interest rates, he added. Average hourly wages rose to an annual pace of 2.9 per cent from 2.2 per cent.

The following Financial Post story, which appeared in other CanWest papers, includes a similar statement from Porter.

Why would an institution in the business of lending people money try to convince them that the job market is strong but that interest rates are about to increase?

Canada’s manufacturing ‘crisis’ worsens
But overall economy remains healthy

Eric Beauchesne
CanWest News Service
Friday, May 11, 2007

OTTAWA — The manufacturing “crisis” deepened last month, resulting in the first overall loss of jobs in Canada since last summer and a forecast by a major economic think tank that suggests the hollowing out of the country’s industrial heartland is not finished.

The loss of 5,200 jobs in April ended a six-month hiring spree, but the loss was not enough to add to the national unemployment rate, which remained at a 33-year low of just 6.1%, Statistics Canada reported Friday.

While analysts had expected an increase in employment, business economists dismissed the loss as not really surprising and nothing to worry about.

“Canada’s labour market remains a veritable picture of health,” said CIBC World Markets economist Warren Lovely. “In fact, the market for new workers is tight as a drum in more than a few corners of the country.”

“The employment gravy train had to end sometime,” echoed BMO Capital Markets economist Douglas Porter, adding the job market remains “very healthy” and that the news would take some further steam out of the strong loonie, which has been weighing on manufacturers.

And it did, as the currency fell just over a fifth of a cent to less than 89.8 cents US after the jobs report was released.

However, Canadian Labour Congress economist Erin Weir noted the small overall employment loss masked both the replacement of 28,000 paid jobs with 23,000 self-employed positions, and 15,000 full-time jobs with 10,000 part-time positions.

Further, two-thirds of the losses were in Canada’s shrinking manufacturing sector, where 52,000 jobs have been lost so far this year, the CLC analysis noted.

“Canada’s manufacturing sector is in crisis,” said CLC president Ken Georgetti.

A forecast by the Conference Board of Canada suggests factory workers in Central Canada should brace themselves for more job losses.

“While most of the provinces will perform well this year, weakness in Central Canada will persist due to the troubles in the manufacturing sector,” said the think tank’s Marie-Christine Bernard.

Nor should manufacturers look to the Bank of Canada to offer much interest rate relief to stimulate the domestic economy or weaken the loonie, as wage inflation edged up to 2.6% last month from 2.1%.

“The wrinkle today is that the very benign wage backdrop may be beginning to turn a little less friendly for the Bank of Canada,” BMO’s Porter noted.

For the full story, click here.