Consumers Keep Canada Economy Afloat as Oil Damage Persists

Updated on
  • Jobless rate remains at 7.1% in April, net job loss of 2,100
  • Economy adds 50k jobs in consumer-related sectors like retail

Consumers continue to hand the Canadian economy a lifeline.

The country added almost 50,000 jobs in consumer-related sectors like wholesale, retail, food and accommodation, Statistics Canada reported Friday in a job report that showed the economy is struggling outside of services.

It’s a familiar story in a nation that’s relied on households for years to drive growth in the face of slumping business investment and exports. Rising home prices and less-volatile financial markets have buoyed consumer confidence in the past few months.

Recent data “really all point to the same direction that the consumer is doing just fine,” Doug Porter, chief economist at BMO Financial Group, said by phone from Toronto.

The national unemployment rate was unchanged at 7.1 percent. Economists surveyed by Bloomberg News projected a 1,000 job increase and a jobless rate of 7.2 percent.

Canada’s currency fell after the jobs report, depreciating 0.4 percent to C$1.2909 per U.S. dollar at 10:12 a.m. Toronto time. It’s still up more that 7 percent this year.

Retailers and wholesalers added 26,800 jobs in April. Hotels and restaurants grew employment by 21,900 positions.

Resource Cuts

Resource companies cut a net 7,800 jobs last month as the oil price shock persists, while factories curbed employment by 16,500. The economy as a whole lost 2,100 jobs, following a gain of 40,600 in April.

How long the Canadian consumer can carry the load has been a question economists and policy makers have been asking for years, especially given the huge debt levels they carry. In 2015, consumption accounted for almost all of the nation’s growth.

Even Bank of Canada Governor Stephen Poloz, who cut interest rates twice last year to 0.5 percent, has said the impact of rate cuts diminishes the closer the policy rate is to zero.

Still, Friday’s job report suggests part of the gains has been strong gains in wages, which were up 2.9 percent in April from a year earlier.

“Wage growth continues to be strong and supportive of consumer spending,” Dawn Desjardins, deputy chief economist at Royal Bank of Commerce, said in a research note.

British Columbia was the star province in the report, with its jobless rate falling to the lowest in Canada for the first time in records back to 1976. The province’s unemployment rate fell 0.7 percentage point to 5.8 percent on the strength of a 13,000 jobs gain.