Photographer: Christinne Muschi/Bloomberg

Blame Ontario Minimum Wage Hike for Canada Job Plunge. Or Not.

  • Canadian economy lost record 137,000 part time jobs last month
  • ‘Proving causality may be contentious:’ Scotiabank’s Holt

The biggest question from Friday’s disappointing Canadian employment report is how much can be traced to Ontario’s sharp minimum wage increase last month.

Canada’s economy lost 137,000 part-time jobs in January, a record monthly decline, led by a drop of 59,000 in Ontario, which was also a record. Ontario saw a net loss of 51,000 jobs.

The numbers are hardly good news for Premier Kathleen Wynne, who increased minimum wages by more than 20 percent on Jan. 1. Big grocers such as Loblaw Cos. and Empire Co. said the wage hike would cost them hundreds of millions of dollars and may accelerate a move to automation like self-serve checkouts. Some smaller restaurant owners also said they would change their menus and juggle shifts as a way of dealing with higher costs.

But economists, and even critics, are reluctant to jump to conclusions based on just one month of data, even though no one is dismissing the possibility that it had an impact.

“The concentration of the job loss in Ontario and the focus upon lost part-time jobs in that province will no doubt feed debate on whether large minimum wage hikes took a toll on employment but proving causality may remain contentious,” Derek Holt, an economist at Scotiabank, said in a note to investors.

No Clear Impact

Wholesale and retail trade lost most jobs in January, followed by professional services

Source: Statistics Canada

Here is a recap of comments:

1. Correction Due

A payback was due for Canada’s labor market in January, after a stellar performance in 2017 that saw the biggest increase in jobs since 2002. The drop in January was the first decline since July 2016, and ended the longest stretch of gains since 2000.

“You had a couple of months of inordinately strong job gains toward the end of last year. If you take a six-month average, you’re still sitting pretty close to 20,000, which is what people generally view as being consistent with a Canadian economy that’s either at trend or slightly above trend from the rear-view perspective,” David Tulk, Toronto-based institutional portfolio manager at Fidelity Investments, said by phone.

Ontario employment grew by 180,000 last year and the province’s unemployment rate still matches the lowest since 2000.

2. Volatility

Economists are always cautious about reading too much into one-month of numbers in a data series that can be volatile. Though the sheer magnitude of the changes is more difficult to dismiss.

This goes for groups like the Canadian Federation of Independent Business, which has called the increase a “job killer”.

Have always cautioned “never to use single month of labor force data to prove a point,” Ted Mallett, chief economist at CFIB, said on twitter. Employment “showed a long-expected correction in January.”

3. Not Alone

Ontario wasn’t alone in seeing a drop in part-time work. Eight of 10 provinces recorded drops, including 31,200 lost jobs in Quebec and 33,400 in Alberta

“Although some might speculate that the decline could relate the large increase in the minimum wage in January, it is important to also acknowledge that there is a lot of volatility in the monthly job numbers,” said Craig Alexander, chief economist at Conference Board of Canada.

4. No Clarity

Broken down by industry, the impact is no clearer.

One sector where you would expect to see a drop -- accommodation and food services, which relies more on minimum wages than any other sector -- actually added 2,200 jobs in Ontario in January.

Yet, in most cases, the data suggest the greater proportion of employees with hourly wages at or below C$14 in December, the greater the declines in January. Wholesale and retail trade, where about 40 percent of employees are at or below the minimum wage, lost 15,500 jobs on the month, the most in more than a year.

5. Tough Spin

Regardless, it will be tough for Wynne to put a positive spin on the numbers. On a net basis, Ontario’s job losses towered over the rest of the country which suggests something may be afoot.

“Given that it was concentrated in Ontario I think it’s fair to say there’s some kind of impact there.” Brittany Baumann, a macro strategist at TD Securities, said by phone from Toronto.

— With assistance by Greg Quinn

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