Canada's flat jobs numbers feed contraction concerns for second quarter

OTTAWA – The country’s labour market ran on fumes last month as gains in the services sector were offset by declines in factory and construction work, Statistics Canada said Friday.

A closer look at the underlying numbers revealed some causes for deeper concern, with some experts saying the data supports expectations the Canadian economy is on track for a considerable second-quarter contraction of up to two per cent.

Overall, the report indicated the labour force shed 700 net jobs last month — a change so slight it is statistically insignificant.

“Digging beneath that sort of benign headline number there were some generally troubling aspects to this report,” BMO chief economist Doug Porter said Friday.

“So, overall I would regard this report as being a bit of a disappointment.”

Porter pointed to several weak data points in the survey results: the decline in private-sector positions, a slide in manufacturing and construction jobs and an apparent weakness in full-time work.

The jobs report also arrived a few days after Statistics Canada released revised figures showing the country had a record trade deficit in April. Those numbers were followed up by May results that were nearly as bad.

Combined, they stirred worries that second quarter weakness will be worse than expected, even though that coincided with a period when still-low exchange rates were supposed to benefit exporters.

“If I had one single concern about this report, and about a number of other reports we’ve seen recently, it is that lack of a pickup that we’re seeing in manufacturing and non-resource exports in recent months,” Porter said.

Jimmy Jean, a senior economist with Desjardins, said until this week his organization had been forecasting a 1.4 per cent contraction in real gross domestic product for the second quarter. Desjardins’ outlook, like BMO’s, is now around two per cent.

Jean said such a recoil would be “the most important contraction in GDP since the last recession.”

The jobs numbers add to that picture, he said.

“I think it just confirms that Canada has been … in a bit of a lull,” Jean said about the details of Friday’s labour force survey.

“The foundation seems a bit shaky. … It’s so very fragile overall.”

Last month, the national unemployment rate fell to 6.8 per cent in June, down from 6.9 per cent the previous month.

The drop was largely due to the fact that fewer people were looking for work as more and more baby boomers move into retirement. The participation rate slid last month to 65.5 per cent from 65.7 per cent.

On a positive note, service sector jobs continued to rise in June. They rose by 45,500 net positions, with the biggest increases in accommodation and food services as well as information, culture and recreation.

Compared to 12 months earlier, the survey found that Canada had added 170,600 services jobs, an increase of 1.2 per cent.

In contrast, the country’s goods-producing industries shed 46,200 jobs in June, as construction and manufacturing industries saw the largest declines. Over the previous year, 63,000 factory jobs were lost overall, a drop of 1.6 per cent.

Employment in the less-desirable category of self-employed work grew by 37,700 last month, while the number of employee payroll positions dropped by 38,400 positions, the labour force survey found.

The private sector lost 10,500 jobs in June and the public sector shed 27,900 positions.

The data also showed that the labour market dropped 40,100 full-time jobs and gained 39,400 part-time positions. However, the agency considered both those numbers to be statistically inconsequential.

British Columbia was the only province to add a significant number of jobs last month with 16,000 new positions, while the labour markets in other regions experienced decreases or remained largely unchanged.

A consensus of economists had predicted the country to add 5,000 jobs and for the unemployment rate to move up to seven per cent, according to Thomson Reuters.

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