Canadians Unfazed by Worst Labor Market Slump Since 2009Theophilos Argitis and Andrew Mayeda
Canada’s worst labor-market slump since the 2009 recession, a source of worry for policy makers, is hardly being noticed.
The share of Canadians who say their jobs are secure, more than two-thirds of respondents in weekly Nanos Research Group polling, has remained elevated in recent months, even as few new jobs are created and the jobless rate ticks up.
Heightened job security is buoying consumer confidence, reflecting the fact that in the current slump, although Canadian employers aren’t hiring many people, they aren’t letting many go either.
“Over the last year, you haven’t had much net job creation but you are still operating at a fairly high level,” said Mark Chandler, head of fixed-income research at RBC Capital Markets in Toronto. At 7.1 percent in June, the unemployment rate is close to its 10-year average, he said. “The second factor is you’ve had a lower firing rate.”
According to the weekly Nanos polling, conducted for Bloomberg News, the share of people who describe their job as secure or somewhat secure was 68.4 percent in the week ended July 18, compared with an average of 66.5 percent over the past year. The percentage has been above two-thirds since mid-May.
The share of Canadians who say their job is not secure or somewhat not secure was 11.8 percent, in line with the 2014 average. The survey, part of polling for the Bloomberg Nanos Canadian Confidence Index, is based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20.
The sentiment index climbed to 60.6 last week from 60.5, reaching the highest in more than four years.
After the world’s 11th-largest economy created more than 800,000 jobs in the three years through 2012, gains have stalled. Year-over-year employment growth has averaged about 0.6 percent over the past three months, the slowest pace since the start of 2010.
Canada’s job growth in 2013 was the slowest outside of a recession year since 2001. The performance caught the attention of Bank of Canada policy makers. In its quarterly Monetary Policy Report published last week, the central bank cited Canada’s ‘very weak’ job growth, saying employment was growing at about half the pace it would be if the economy was operating at full output.
At the same time, unemployment, which edged up to 7.1 percent from 7.0 percent in June is still down from a peak of 8.7 percent in August 2009. It matched its post-recession low of 6.9 percent in April.
While Statistics Canada doesn’t provide data on firings, the Spring 2014 Bank of Canada Review estimated they fell to “roughly pre-recession levels” this year. Even as employment growth slowed, the number of unemployed Canadians has remained relatively unchanged since the end of 2012. This could bode well for consumer confidence, even if new jobs are scarce.
“The reality is that the unemployment rate is still grinding lower,” said Doug Porter, chief economist at BMO Capital Markets. “The further we get away from the recession, the more people will believe that the storm has passed.”
The Nanos index has two sub-indexes. The Pocketbook Index, based on responses to the questions about job security as well as personal finances, climbed to 60.8 from 60.3 the prior week. The Expectations Index, based on responses about the national economy and real estate, slipped to 60.4 from 60.7.