By Christine Hughes, Canada. Chief Investment Strategist, OtterWood Capital:
Canada’s employment stats for February were not what most expected – there was a huge jump in full-time jobs. Most commentators tried to put a positive spin on this, but I have to disagree. Canada’s labour market is struggling and the outlook for the near future isn’t looking any better.
The chart below is what the Bank of Canada tracks as a measure of the broader health of the labour market. As you can see aggregate hours (the sum of all hours worked by full-time and part-time employees) have been flat over the past year.
What limited strength exists in the labour market comes from two unsustainable sources: construction and the public sector.
What’s worrisome is the impact of oil prices in Alberta. As per Macquarie, half of the gains in construction employment across Canada occurred in Alberta, a province where construction activity is likely to retreat. As you can see in 1986 in the months following the decline in oil, Alberta’s construction industry employment fell by 17%. A similar decline in coming months would mean nearly 50K in construction job losses in Alberta.
Employment in Alberta fell by 14,000 jobs in February, and the jobless rate jumped by the most since the 2009 recession.
The energy sector is already seeing laid-off workers turn to food banks. Ms. Reynar, executive director of Leduc & District Food Bank located about an hour south of Alberta’s capital, told the Globe and Mail that they were already seeing a jump in the number of people using the food bank.
“Probably 80 percent to 90 percent of the people we’re seeing have been laid off. Many of those seeking help have piled on debt while waiting for employment insurance to kick in,” she said, pointing to more financial pressure for households already struggling to make ends meet.“People have panicked,” she told the Globe and Mail, predicting another jump in usage as layoffs intensify. “We’re just at the beginning of it.” By Christine Hughes, OtterWood Capital Management.
Just when oil collapses, housing stumbles, and layoffs begin, Canadian households go on another borrowing binge. Read… Household Debt Soars in Canada, “Stability” at Risk