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Canada’s Economy Remains Sluggish at Best


Julian Wolfe
August 10th, 2014


In the month of July, only 200 net jobs were created. Despite Conservative rhetoric putting the Canadian economy on top of the G7 pack, our job creation record lags behind and remains unstable. It is noteworthy that the majority of lost full-time jobs have at best been replaced with temporary part-time jobs. The Conservatives can no longer afford to kick the can down the road and tell Canadians their opponents can’t handle the economy.

With an election looming within the year, the economy will once again sit as top priority amongst Canadians. Four years after the Conservatives promised a majority mandate would translate to a stable economy, better job market, and balanced budget for Canadians, we see today smoke in mirrors as the country continues to shed good quality jobs and the projected coveted surplus is based solely off one-time sell offs which have been conveniently scheduled.

With a strong Liberal resurgence as seen in a continuous series of polls, the Conservatives rely on the economy to convince Canadians to think twice about change – ironically from the party that gave them a strong economy and surplus in 2006. The bad news for the Conservatives is the Liberals and NDP learned from 2011 and will be using the economy as a wedge issue in 2015 and unless they can reverse this mediocre trend, the opposition’s plans will gain credibility.

The 200 created jobs is a far-cry from the 20,000 projected job creation after June shed 9,400 jobs. Economists entered 2014 already pessimistic after the poor growth in 2013. Economists deemed 2013 the worst year for job growth in nearly a decade and 2014 isn’t shaping up to be much better.

“Did Canada’s job market take off on vacation in July? We hope so. Otherwise, this could be a signal that Canada’s economy is not doing as well as expected. The change in fulltime positions and part-time positions is a hard pill to swallow. In fact, on a year-to-date basis, full-time employment is up only 0.4% y/y while part-time jobs are up 2.2% y/y. This is not an indication of a thriving economy.

“Job creation is not as strong as we had expected. Employment growth this year will probably give the worst performance since the recession, coming in below 1%. With stronger growing Canada and US economies expected next year, job growth should improve.”

Arlene Kish, Senior Economist at IHS Global Insight

To add insult to injury, the Conservatives’ narrative in January before the passing of the late Jim Flaherty was the economy is “still strong” but don’t forget that “the economic recovery remains fragile.”

Mid-way through the year, the mediocre job numbers have left a sour taste in the mouths of many economists.

“There was a shocking drop in full-time jobs, down almost 60,000. We did see a drop in the unemployment rate, however, that drop only came on the back of the participation rate, so it’s not encouraging at all.

“Overall, it goes in line with what we’ve seen seasonally in the July report, which is that it tends to miss expectations over and over again.

“All in all, it highlights a very disappointing pace of job gains in Canada.”

Camilla Sutton, Chief Currency Strategist at Scotiabank

This disappointing job growth has negatively impacted Canadians browsing the market.

“The jobless rate was down a tick but we are now seeing the lowest participation rate in 13 years, so that’s another indication that things are a little bit worse below the surface.”

Robert Kavcic, Senior Economist and Vice President of BMO

So what happened to the strong and stable economy the Conservatives promised in 2011?

“Disappointing report, not only showing no gain in July, (but) follows weakness in June. We have a return to volatility in terms of the series so far this year.”

Paul Ferley, Assistant Chief Economist at the Royal Bank of Canada

The news the Conservatives will likely want you to hear is despite the dismal job performance, the unemployment rate managed to tick down to 7.0% from 7.1% – but only because the economic situation has left many Canadians discouraged and out of the realm of prosperity.

“At first glance, the drop back in the unemployment rate to 7.0% last month, from 7.1%, looks encouraging. But closer inspection shows that decline was only because a further 35,400 discouraged job seekers gave up and left the labour force. As a result, the participation rate slumped from 66.1% in June to a 13-year low of 65.9% in July.”

Paul Ashworth, Chief North America Economist at Capital Economics

The Conservatives will likely sell you on the prospect that in an unstable global economy, much of the job numbers we are seeing today are out of their control, and are for the most part, but they will point to their record being the best in the G7 – a comparison that can’t be made today.

“This follows a string of lackluster employment reports for Canada, sending a clear signal that the labour market is stalling, in spite of the Canadian economy expanding in each of the first five months of 2014. Meanwhile, job gains south of the border continue to roar ahead.

Randal Bartlett, Senior Economist at TD Economics

The analysts have said more than enough, but nothing speaks louder than numbers, especially in the case that Canada is outperforming the G7, which includes the United States.

While our market remains volatile and sluggish, the US recorded its sixth consecutive month of job gains of more than 200,000 persons since 1997.  We must not forget that the American economy and population are much larger than Canada’s.

Below is a comparison of year over year employment growth for Canada and the US over the past 3 years as a percentage of the overall level of employment.

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The two countries seem fairly even with Canada overtaking the US during some of its weaker periods. The above charts treat full-time and part-time jobs equivalently, but take the part-time growth out of the comparison and the picture changes quite a bit.

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The above chart illustrates the US outperformed Canada in 23 out of 30 months under this metric. From July 2012 to June 2014, the US full-time job market grew on average 1.34% compared to Canada’s mere 0.97%.

It turns out the Conservatives’ economic rhetoric remains rhetoric and while the party remains plagued in scandal and reckless and unconstitutional policy decisions, the economy itself may not bring down the to-be 9 year old government, but for a government with an image problem and unpopular domestic policy stances, the last thing they need is for the economy to be the next slap in the face.

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