Canada's Labour Market Ends 2011 on a Modest Note

The Canadian economy added 18,000 net new jobs in December after shedding more than 72,000 over the two months prior. For the year as a whole, 263,800 net jobs were added.

Despite the monthly gain, the unemployment rate continued to edge up by one-tenth of a percentage point, to 7.5%, as more people entered the labour force. In fact, the participation rate (the share of the workingage population either working or looking for work) rose for the first time since April, climbing two-tenths of a percentage point to 67.2%.

Reversing last month's gain, full-time positions fell by 25,500 this month. This was offset by the creation of 43,100 part-time positions.

Sectorally, manufacturing and professional, scientific, and technical services were the big winners this month, recording gains of 30,400 and 16,100, respectively. Public sector hiring fell by 17,300 net positions, offset mainly by 31,100 gain in self-employed individuals.

At 2.2%, wage gains held relatively steady in December. This rate is well above the 1.3% average pace recorded in the previous 4 months.

As has been the case throughout this recession and recovery, the job gains have been concentrated decidedly among older workers. Those aged 55 years and over recorded gains of 24,000 in December, while positions open to those aged 15-24 fell by 16,800. The unemployment rate for younger workers remained steady at 14.1%, almost double the national average.

Key Implications

Today's job gains were certainly welcome news after two months of significant declines. However, neither the gain nor the underlying details would suggest any reversal of fortune for the Canadian economy as the 3-month moving average fell by more than 18,000 jobs. High levels of uncertainty surrounding any number of international developments, notably the European debt crisis, have clearly shaken the confidence of both consumers and businesses.

This is unlikely to abate in the coming year. Government hiring is likely to remain under pressure in the coming months and private sector hiring will likely be tested by further deterioration in Europe's debt crisis.

All said for the coming year, TD Economics expects the unemployment rate to continue treading higher, likely to about 7.7%, while job gains will average a paltry 10,000 per month, more heavily weighted to the second half of the year.

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