David Rosenberg: Here’s why the Bank of Canada is rolling the economic dice if it stays on sidelines any longer

Fewer than 60 per cent of Canadians who entered the labour market over the past year have managed to land a job. Photo by hristinne Muschi/THE CANADIAN PRESS

Article content

The upside headline surprise in Canada’s employment data last week camouflaged a serious decay in the broad contours of the domestic labour market. As a result, the Bank of Canada is rolling the economic dice if it chooses to stay on the sidelines any further.

Article content

Canadian employment did manage to come in better than expected, with a flowery May gain of 8,800 jobs that topped consensus views of a loss of 10,000. There was celebration in some circles over the fact that full-time employment dominated, showing a nice 57,700 pop on top of a 31,500 run-up in April (though still virtually flat since January) and that the private sector tacked on 60,600 workers to the payroll (the best rally since June 2023, but that still left employment here stagnant since the turn of the year).

Article content

Article content

Article content

That is where any good news in this report ended. The rest was just various degrees of bad.

Article content

Article content

Article content

Let’s put that 8,800 headline employment increase into its proper perspective. This same month, the ranks of the unemployed swelled 26,500 and that is because most of the 35,300 job seekers entering the labour force failed to find any work. Indeed, fewer than 60 per cent of Canadians who entered the labour market over the past year have managed to land a job.

Article content

While employment is up a meagre 1.2 per cent over the past year, the number of jobless has surged nearly 15 per cent or well over 10 times that job creation pace.

Article content

Also hidden beneath the headline was that there were more than 36,000 permanent job losses posted in May — not your run-of-the-mill temporary layoffs — in what was the sharpest such increase since December 2022, so the total was 395,000, which is the second-highest level since early 2021, when the economy was struggling to emerge from the fangs of the pandemic.

Article content

The mean duration of unemployment rose to 21.8 weeks from 21.5 weeks (it was 18.4 weeks a year ago). At the same time, the share of the unemployed who have fruitlessly been searching for work for more than 26 weeks edged higher to 22.6 per cent from 22.4 per cent in April (it was 18.1 per cent a year ago).

Article content

Article content

This attests to the lack of hiring activity, which is a piece of information one cannot glean just from the headline. Meanwhile, the number working part time because they couldn’t find a full-time position jumped 9,600 in May to 170,200 — a 17 per cent increase year over year.

Article content

Article content

See what I mean by more bad than good. Hopefully, the folks at the Bank of Canada have done forensic work of their own on this report.

Article content

There’s more. As in, the industry breakdown.

Article content

Manufacturing employment fell 12,200 and is now down for four consecutive months by a cumulative 55,000. We have not seen anything like this since July 2020; back then it was COVID-19; today, it is tariffs.

Article content

Along with the trade-sensitive transportation services sector, which lost a huge 15,500 jobs last month, you can see the ill effects of the recent appreciation in the Canadian dollar and being caught in the vortex of this broadly based selloff in the greenback.

Article content

When we see construction payrolls dive 7,400 and also falter in each of the past four months, you can easily draw the conclusion that the Bank of Canada has been pushing on a string because if rate cuts were working, this would be the one sector leading the charge on the employment front.