Canada’s economic landscape is at a pivotal moment. The November Labour Force Survey (LFS) comes out this Friday and it should be quite consequential. This report will continue to be an essential benchmark for evaluating what’s been working to move our labour market in a positive direction. Following mixed signals from previous data, stakeholders are keen to see whether the apparent job gains in recent months reflect genuine growth or merely statistical anomalies.
Like the LFS, the LFE is a survey that contacts households to gather important information. Recently, it came under fire when the SEPH just disclosed a horrific loss of 58,000 jobs for the month of September. In comparison, the LFS showed an increase of 26,000 jobs for that same month, after adjusting for comparability. This mismatch has created a climate of doubt around the soundness of the labor market.
Last week, economists were greeted with another astounding development on the private sector employment front. In fact, in the last six months, just 41% of the 251 industries have seen growth. Such a low proportion is unheard of absent recessionary conditions. Analysts would be excited if the November figures were almost in. To ascertain whether the recent surge in hiring is a step forward or a momentary episode.
Good news—private sector wages are climbing! They’ve continued to climb at an impressive annualized rate of 5.5% just over the past half-year. That acceleration in wages is an increasing challenge to the efforts to control inflation. Wage pressures are making it more difficult for the Bank of Canada to cut policy rates further. This significantly complicates the bank’s task of getting inflation back down to the 2 percent target.
“However, this fragility has not prevented wages in the private sector from accelerating, rising at an annualized rate of 5.5% over the last six months, a pace that is incompatible with bringing inflation back to target.” – National Bank of Canada economists Matthieu Arseneau and Alexandra Ducharme
The diverging trends between the LFS and SEPH have understandably led to some confusion over the state of Canada’s labour market. As we approach the next report, analysts are waiting with bated breath. They’d like to think, too, that it confirms the good news trends of recent months.
“The November data from the Labour Force Survey (LFS, conducted among households) will be published this Friday. These figures are eagerly awaited, as they will reveal whether the upturn of the last two months is confirmed or whether it was a statistical fluke. This momentum indeed contrasts with soft data showing a weak appetite for hiring.” – National Bank of Canada economists Matthieu Arseneau and Alexandra Ducharme