RBC ECONOMICS RESEARCH - DAILY ECONOMIC UPDATE – January 8, 2010
Labour market cut 2,600 jobs in December, unemployment rate steady at 8.5%
Canada's labour market was relatively stable in December, compared to the previous month, with the economy trimming 2,600 from payrolls. This disappointed forecasts for a 20,000 rise in employment; however, December's slip followed a staggering 79,100 increase in November, which more than made up for the 43,200 jobs lost in October. On net, there were 33,300 new jobs created in the final quarter of 2009. The unemployment rate held steady at 8.5% as 8,900 left the labour force in the month.
December's small-jobs decline reflected steady part-time employment with the number of full-time jobs falling by 2,400. Despite this moderation, full-time employment increased by 52,700 in the final quarter of 2009. Gains in the services-producing industries' employment totalled 9,400 in December, which masked rather substantial movements across industries. Strong gains in wholesale and retail trade, professional services, health care and accommodation services were nearly offset by falling employment in finance, insurance and real estate, public administration, business support services, transportation and warehousing. In the goods-producing industries, 12,000 jobs were cut with a rise in construction jobs being offset by declines in all other categories. Manufacturers reduced their payrolls by 9,700. Private companies cut 2,600 from payrolls, and the number of self-employed rose by 17,800, dampening the positive news in the report.
Alberta saw payrolls rise while Ontario, Manitoba and New Brunswick posted job losses.
The annual gain in the average hourly wage rate for permanent workers edged up to 2.2% from 2.1% in November, which was the slowest annual pace since March 2007.
Today's report supports our forecast that the economy had a better quarter in the fourth quarter 2009 with 33,300 jobs created, the largest quarterly increase since the third quarter 2008 and building on the 13,200 job gains in the prior quarter. This improvement in the labour market jives with our forecast for real GDP growth of 3.4% annualized in the final quarter of 2009. Despite the rise in employment in the final half of the year, the recession took its toll on the economy in 2009 and 240,000 jobs were lost over the course of the year.
The stable unemployment rate highlights that even though economic activity has picked up pace, the amount of slack generated during the recession will take some time to wear away. As a result, the unemployment rate will remain elevated in the near term. Against this backdrop, inflation pressures will remain benign as well. For the Bank of Canada, the economic conditions do not warrant any deviation from the conditional commitment to a 0.25% overnight rate until the end of the second quarter. The rally in the housing market and improved labour market conditions indicate that the economy started 2010 on firm footing, and we have recently upgraded our forecast for growth in the first half of the year. As the economy's momentum builds, the Bank will look to remove monetary stimulus, and we forecast 100 basis points in rate hikes in the final six months of 2010. Today's report is unlikely to see the Bank change its stance at the next fixed action date on January 19, 2010, and we look for the conditional commitment to a 0.25% overnight rate to be maintained.
Dawn Desjardins, Assistant Chief Economist, RBC Economics
Thanks
Paul Ink
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