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Read the article below and answer the following questions. 

 

Canada's job run stalls in March with first drop in seven months

Theophilos Argitis Bloomberg News April 5, 2019

Canada posted its first employment drop in seven months, ending an unusually strong run of job gains. Employment fell by 7,200 in March, mostly full-time positions in the services sector, Statistics Canada said Friday in Ottawa. Economists had forecast employers would add 6,000 jobs. Statistically, the decline is considered a flat reading. The country's jobless rate was unchanged at 5.8 per cent.

It was only a matter of time before Canada's jobs market cooled after a sharp rise in employment in recent months, particularly as other indicators have showed a much weaker picture.

Canada's economy had added 290,000 jobs between August and February, the largest six-month increase since 2002. Those gains however were out of line with data that showed production stalling at the end of last year, in part because of falling oil prices.

"The party had to end at some point, since Canadian jobs data had outrun other signposts of economic growth so dramatically, making the small retreat in employment in March not much of a surprise," Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note to investors.

The strong performance of the jobs market up to now has been one of the reasons why the Bank of Canada has stuck to its belief the economy will rebound later this year.

The Canadian dollar extended declines after the release, down 0.2 per cent to $1.3389 per U.S. dollar in Toronto trading at 8:35 a.m. The Canadian jobs report coincided with U.S. payroll numbers that came in more than forecast in March. Labour force numbers, which had been rising strongly along with jobs, also declined slightly in March, down by 11,300.

The employment decrease was driven by a 17,300 drop in private-sector jobs, with public sector employment up slightly last month. Full-time positions were down by 6,400, while the economy also lost 900 part-time jobs. Health-care and accommodation led the declines. Among provinces, Quebec and Ontario saw the largest declines, with combined losses of 21,700.

The labour market continues to improve in one respect: annual hourly wage gains accelerated to 2.4 per cent in March, the fastest annual gain since September, up from 2.3 per cent in February. Pay gains for permanent employees rose to 2.3 per cent, the strongest increase since August.

Total hours worked also picked up in March, increasing by 0.9 per cent annually, after a drop of 0.1 per cent the previous month.

Canadian Employment (March 2019)

Brian DePratto, Senior Economist TD Bank April 5, 2019

A blasé March jobs report

The Canadian economy shed 7.2k (7,200) net jobs in March, ending a six-month streak of net gains. The unemployment rate held steady at 5.8% as slightly fewer Canadians engaged with labour markets.

Given the small change, the breakdown has less meaning than normal, but the drop was largely in full-time employment
(-6.4k), and in the private sector (-17.3k). Public sector employment (+4.2k) and self-employment (+6.0k) held up in March.

On an industry basis, it was a mixed bag. The goods-producing sectors (+1.6k in aggregate) were roughly unchanged. Conversely, modest declines in some service sectors, notably health care (-20.0k), business support services (-14.3k) were offset by small gains in other categories, leaving the sector as a whole down 8.8k net positions.

The net drop in employment was largely a Quebec (-12.9k) and Ontario (-8.8k) story. B.C. provided some offset (+7.9k), with the remaining provinces even closer to no-change readings. 

On the wage front we saw a slight uptick, to 2.3% year-on-year for permanent employees (February: +2.2%). Total hours worked rose 1.0% month-on-month, the strongest gain in more than a year, but not enough to offset the prior three months' declines. 

Looking beyond the monthly noise, the six-month trend remained solid at 35.5k per month. Employment was up 1.8% year-on-year in March.

Key Implications

Yawn. The story of the March jobs report was one of statistical zeros pretty much across the board. The end of a six- month streak of job gains is sure to catch headlines but given the strength we've seen over the past half year, a flat report isn't really surprising and indeed makes some sense given the relatively modest performance of other economic indicators in recent months. 

If there is a bigger area to watch, it is hours worked. The 1% monthly climb in March is encouraging, but came after weather-induced softness in February, and was insufficient to reverse the prior three months of declines. This is despite adding a net 123.3k jobs over this time, with more than half in full-time work.   

For the Bank of Canada, the key area of today's report is likely wages, where growth was effectively unchanged at 2.3% year to year. This is pretty close to the historic average, suggesting they have little to worry about from an inflation perspective (and at the same time, hardly indicative of tight labour markets). This again suggests that the current setting of the policy rate may be just about right, underscoring our view that the Bank of Canada may be on hold for quite some time to come.  

 

Questions: 
Canadian job growth tops forecasts as full-time hiring jumps

1a. Use the Internet to define the following terms: leading, lagging, and coincident indicators.

1b. What type of indicator is the unemployment rate? Cite material from the article to defend your answer. 

 

2. State two key negative statistics (numbers) resulting from Stats Canada's March unemployment report.

 

3. Explain the following phrase in the article: "Statistically, the decline is considered a flat reading." 

 

4. State why the March jobs report was an unpleasant surprise to economists. 

 

5. List one positive aspect of the labour market in March.

 

Canadian Employment (March 2019)

 

6. Read the following quote: Given the small change, the breakdown has less meaning than normal, but the
drop was largely in full-time employment (-6.4k), and in the private sector (-17.3k). Public sector employment (+4.2k) and self-employment (+6.0k) held up in March.

 

Analyze the trends in the private sector, public sector, full-time, and self-employment in March's report. Explain whether the trends in EACH of the aforementioned sectors is positive or negative. Defend your answer for EACH sector. 

 

7. Based on your unemployment notes, state why Canada is or is not achieving a natural rate of unemployment as a result of the March Labour Force Survey. Cite a statistic from the article to defend your answer.

 

8. Read the material at the bottom of page 4 of your unemployment notes. (Because of the policy importance....would trigger inflation).

 

Based on statistics from the "Inflation" article (which is also in unit 4 material), state whether Canada has reached a natural rate of unemployment. Cite one key statistic from the inflation article to
support your answer. Cite a quote from THIS article to support your answer.