Latest employment numbers positive, but ‘a little bit stale’

Canada nearly reached full employment during the second week of December, with better-than-expected jobs growth, but this month’s numbers could tell a different story when they’re released in February, economists told Advisor’s Edge Friday.

National employment numbers released Friday “seem to be a little bit stale now, given everything we have seen with omicron and restrictions,” TD Bank Group senior economist Sri Thanabalasingam said.

Canada’s unemployment rate was 5.9% in December, down from 6% in November and 7.1% in August, Statistics Canada reported Friday.

“It did not include the impact of omicron and those related provincial restrictions,” said Thanabalasingam. “We could see a reversal from some of the [employment] gains that we saw in December.”

RBC senior economist Josh Nye echoed Thanabalasingam’s prediction.

“We will probably take a step back in January with omicron and some of the new restrictions that are being put in place,” Nye said.

But the job losses resulting from the current Covid-19 case counts will probably get reversed “fairly quickly,” Nye suggested.

The employment numbers released Friday are based on StatsCan survey data from December 5 through 11. Those numbers probably don’t factor in a “precautionary impact” in the middle of December as people cancelled various holiday get-togethers, Thanabalasingam suggested.

When StatsCan releases its January employment numbers in February, even those “may not contain the full impact of omicron on the labour market,” Thanabalasingam said. This is because February’s numbers will be based on figures from early January, before new public health restrictions took effect.

“It really remains to be seen whether omicron and these high [Covid-19] case loads will remain high in February and March,” Thanabalasingam said.

“If we look at places like South Africa, for example, it seems like there was a sudden increase in [Covid-19 case counts] and things started to come back down. So if we see something similar in Canada, we could see restrictions start to be lifted in February,” Thanabalasingam added.

All told, Canadian job gains before Dec. 11 “were stronger than we were expecting,” Nye said.

“It follows a pretty strong streak of job gains over the second half of 2021. The unemployment rate is now below 6%, which is pretty close to where we were pre-pandemic.”

Whether Canada approached full employment in early December, however, depends on who you ask.

“We used to say 6% to 6.5% is full employment. That has probably come down — probably more in the 5.5% to 6% range, which we are in now,” said Nye. “There is a lot of uncertainty about what actually constitutes maximum sustainable employment.”

Unemployment stood at 5.7% in February 2020, within 0.5 points of the record low unemployment rate — 5.4% — that Canada enjoyed in May 2019.

As of December 2021, total unemployment was 1.21 million, up by 67,000 from 1.15 million in February, 2020, StatsCan said.

“The adjusted unemployment rate — which includes people who wanted a job, but did not look for one — was 7.6% in December, marking the first return to the pre-pandemic level for this indicator,” the agency added.