Canada suffers biggest job loss in nine years
Bad employment numbers cap off a brutal week on global stock markets.
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Dismal Canadian job numbers Friday capped off a week of rough financial news, including jaw-dropping volatility on stock markets in Canada and around the globe.
Statistics Canada reported record part-time job losses in January that gave Canada’s labour market its biggest one-month drop since the last recession in 2009 — after which stock markets began their bull run.
The loss of 137,000 part-time positions was led by Ontario, which hiked its minimum wage by 20 per cent on Jan. 1.
A tumultuous week of trading continued Friday, with Toronto’s TSX off more than five per cent since last week and 8 per cent from its all-time high.
Both the net loss of 88,000 jobs across Canada last month and the stock-market sell-offs — the Dow Jones industrial average and the S&P 500 stock index have both tumbled more than 10 per cent from all-time highs reached just two weeks ago — came as jolts after a banner 2017 for both the labour and stock markets, economists said.
The job market collapse in January marked the first decline since July 2016, and ended the longest stretch of gains since 2000.
“Canadian employment suffered its first setback in 16 months in January — and it was a hefty one,” said BMO chief economist Douglas Porter. He said Ontario was notably soft, with a drop of 50,900 jobs — all in part-time, and a record for the province. The biggest declines were in retail and wholesale trade, “although there is no way one can draw a straight line from the (wage) hike to one month’s job move,” Porter said in a research note.
He noted that harsh weather in January also appeared to have hit employment in the province’s construction sector (down 14,900 jobs) and transportation industry (down 5,900 jobs).
On the flip side, Statistics Canada reported the Canadian economy generated 49,000 full-time positions last month. While the overall decline helped push the national unemployment rate up to 5.9 per cent in January from 5.8 per cent the previous month, it’s still well below the 6.7 per cent it sat at a year ago.
“Overall, a mysterious mix of good and bad, with the latter’s impact blunted by how strong job gains were in the lead-up to these figures,” CIBC chief economist Avery Shenfeld wrote in a research note to clients.
Ontario’s Economic Development Minister Steven Del Duca dismissed concerns that the drop in part-time jobs was due to the government’s decision to raise the minimum wage to $14 five weeks ago, an increase of $2.40 per hour that many businesses said was too much.
“The numbers that we’re seeing this month . . . are part of a national trend,” he told reporters.
Del Duca, who took over the portfolio in a recent cabinet shuffle as Premier Kathleen Wynne positioned her government for the June 7 election, said the fact that Ontario’s unemployment rate remained steady at 5.5 per cent is a sign economic growth is “strong and sustained.”
“Ontario is leading Canada in economic growth,” he added, noting the jobless rate has been below the national average for 34 consecutive months.
“Kathleen Wynne was warned by experts that her overnight minimum wage hike would put our most vulnerable people out of work,” Ontario PC economic development critic Monte McNaughton said in a statement.
“Kathleen Wynne’s only objective with her minimum wage hike was to hold onto power and as a result, things are getting worse,” he said.
Rocco Rossi, president of the Ontario Chamber of Commerce, said the numbers “reflect the concerns we have heard from businesses for months.”
Economists are divided on how minimum wage increases play out. Some research has suggested a reduction in hours or jobs follow mandated wage bumps, while other studies suggest no long-term connection between wage increases and dips in employment rates.
The 59,000 figure is a “whopping” one, said Matthieu Arseneau, senior economist at National Bank Financial Markets, in a note.
It “may be a sign of adjustments made by corporations coping with a minimum wage surge,” he said, noting young people ages 15 to 24 lost 24,000 part-time positions.
However, economists also pointed to possible connections between Ontario’s minimum wage and Canada’s stronger average wage growth of 3.3 per cent in January.
“One of the positives in today’s release was the fact that wage growth picked up,” said Craig Alexander, chief economist at the Conference Board of Canada.
“Now part of that might be reflecting the increase in minimum wages in Ontario because that increase in minimum wage is impacting more than 20 per cent of all the workers in Ontario.”
North American wage growth is raising its own concerns, however. The current stock market rout, for instance, began last Friday after U.S. jobs data showed wages there growing more than anticipated, raising worries that creeping signs of higher inflation might push the U.S. Federal Reserve to increase interest rates more quickly than expected.
Toronto’s S&P/TSX composite closing down 31.08 points at 15,034.53.
On Wall Street, the Dow Jones industrial average rallied in late trading after sinking 500 points midday and surging more than 349 points earlier in the session.
The Dow ended with a 330.44 point or 1.38 per cent gain to 24,190.90, in the wake of Thursday’s session that ended with a steep drop marking a 10 per cent decline from the market’s peak in January. The Standard & Poor’s 500 rose 38.55 to 2,619.55 while the Nasdaq composite index was up 97.33 points or 1.44 per cent to 6,874.49.
Both the Dow and S&P 500 lost more than five per cent for the week, as the Dow recorded 1,000-point drops on Monday and Thursday.
“Volatility is here is to continue for a few days perhaps a few weeks longer,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
Traders are now focusing on next week’s U.S. consumer-price data, with equity investors took the signal to mean interest rates will rise as inflation gathers pace.
With files by Rob Ferguson, Kristin Rushowy and The Star’s wire services