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Canada’s August Labour Numbers find support in Plant Usage Rates

0 72 Economic

by Alex Carrick

Canadian total employment in the month of August pulled ahead by +22,000 jobs.
2017-09-13-Canada-Labour-Graphic

The year-over-year change has been a strong gain of +374,000 jobs.

The monthly average increase in employment has been three times faster year to date in 2017 than during the same January-to-August period of 2016, +27,000 versus +9,000.

Considerable volatility will often appear in Statistics Canada’s Labour Force Survey numbers. For example, full-time jobs in August were -88,000. Thankfully, part-time work more than came to the rescue, +110,000.

Year over year, full-time (+213,000) and part-time positions (+161,000) have been in better alignment.

The ‘headline’ unemployment rate in the latest month improved slightly to 6.2%, from 6.3% in July. A year ago, in August 2016, it had been 7.0%.

At 6.2%, the current jobless rate is at its lowest level since October 2008 (also 6.2%), which was just before the Great Recession broke into Canada’s house and trashed the place.

Canadian construction employment in August was +5,000, but that left the year-to-date figure at a still lowly +2,000.

Manufacturing employment north of the border in August was -12,000, lowering the year-to-date number for the sector to +48,000. Nevertheless, that’s a welcome turnaround from -40,000 recorded year to date in August 2016.

Construction’s seasonally adjusted (SA) unemployment rate is presently 7.3%, down from 9.1% in August of last year.

Manufacturing’s unemployment rate has now dipped to 3.9% compared with 5.1% 12 months previously.

(During the worst of the Great Recession, Canada’s construction unemployment rate soared to 12.3% in June 2009. Manufacturing’s level ballooned to 11.8% in May 2009.)

Comparing year-over-year job creation results for Canada with those of the U.S., as reported by the Bureau of Labor Statistics (BLS), the former is ahead with respect to ‘total’ (+2.1% versus +1.4%); ‘services’ (+2.2% versus +1.6%); and ‘manufacturing’ (+2.3% versus +1.1%), but is a step behind in ‘construction’ (+1.6% versus +3.2%).

Table 1 shows that Manitoba (4.9%) currently has the lowest unemployment rate among all provinces. B.C. (5.1%) is in second spot. B.C. (+3.9% year over year) has the speediest rate of jobs creation.

Of the +374,000 net new jobs (i.e., in nominal terms) year over year, a little over 40% of them have arisen in Ontario (+154,000). Quebec (+93,000) and B.C. (+92,000) have each accounted for about 25% of the improvement.

Statistics Canada, in its latest data release, says that if it calculated the unemployment rate according to the same stricter standards as in the U.S. (i.e., by the BLS), August’s estimate would be reduced from 6.2% to 5.3%.

Table 1: Canadian Provincial Labour Markets - August 2017
Unemployment rate Employment (000s)
Province Aug 2016 Aug 2017 Aug 2016 Aug 2017 Net % change
Newfoundland and Labrador 12.4% 14.7% 235.1 220.4 -14.7 -6.3%
Prince Edward Island 12.0% 8.8% 71.3 73.8 2.5 3.5%
Nova Scotia 8.5% 8.9% 445.1 444.6 -0.5 -0.1%
New Brunswick 9.3% 7.8% 352.6 351.9 -0.7 -0.2%
Québec 7.0% 6.1% 4,138.7 4,232.0 93.3 2.3%
Ontario 6.7% 5.7% 6,983.6 7,137.4 153.8 2.2%
Manitoba 6.0% 4.9% 633.6 649.4 15.8 2.5%
Saskatchewan 6.5% 6.4% 569.1 568.1 -1.0 -0.2%
Alberta 8.5% 8.1% 2,253.0 2,286.5 33.5 1.5%
British Columbia 5.5% 5.1% 2,387.7 2,480.0 92.3 3.9%
Canada 7.0% 6.2% 18,069.8 18,444.1 374.3 2.1%
Data source (seasonally adjusted figures): Statistics Canada.
Table: ConstructConnect.

The tightness in Canada’s labour market suggests that some capacity constraints may be starting to appear throughout the nation’s economy. The Industrial Capacity Utilization Rates, Second Quarter 2017 report recently released by Statistics Canada reveals the truth behind such speculation.

The capacity usage of Canada’s total industrial sector rose by 6.1 percentage points from Q2 2016 to Q2 2017. The climb for manufacturing was 3.6 percentage points.

Total Canadian industry now has a capacity utilization rate of 85.0%. Construction (87.7%), forestry and logging (+85.7%) and electric power (85.2%) are all a little higher.

Total manufacturing presently has an 84.2% capacity utilization rate.

Fourteen of manufacturing’s 22 sub-categories have usage rates that exceed 85.0%.

The industrial sub-sectors with usage rates of 85% or higher are shaded in blue. Historically, the 85% benchmark has carried special significance. When firms break through it, that’s when they’ll think more seriously about expanding facilities.

Also noteworthy is the fact that only three of manufacturing’s sub-sectors had percentage declines in their usage rates year over year. The nineteen others had increases.

Furthermore, in eight of those instances, the increases were outsized, of +5.0 percentage points or more.

Table 2: Canadian Industries - Capacity Utilization Rates
(85% and above is benchmark for more likely capital spending)
Percentile
Q2 2016 Q2 2017 Change
Total industrial 78.9% 85.0% 6.1
Construction 83.5% 87.7% 4.2
Forestry and logging 88.9% 85.7% -3.2
Electric power generation, transmission and distribution 82.3% 85.2% 2.9
Oil and gas extraction 73.3% 84.0% 10.7
Mining 68.4% 82.8% 14.4
Total Manufacturing 80.6% 84.2% 3.6
Furniture and related product manufacturing 86.3% 92.7% 6.4
Leather and allied product manufacturing 84.8% 92.4% 7.6
Plastic product manufacturing 83.7% 91.5% 7.8
Textile mills 75.1% 91.0% 15.9
Petroleum and coal products manufacturing 81.7% 90.3% 8.6
Wood product manufacturing 88.1% 89.8% 1.7
Paper manufacturing 87.2% 89.3% 2.1
Rubber product manufacturing 85.9% 88.0% 2.1
Transportation equipment manufacturing 88.1% 87.8% -0.3
Computer and electronic product manufacturing 75.6% 86.8% 11.2
Chemical manufacturing 84.0% 86.7% 2.7
Food manufacturing 82.2% 86.6% 4.4
Beverage manufacturing 85.2% 86.4% 1.2
Machinery manufacturing 71.0% 85.3% 14.3
Textile product mills 69.2% 76.9% 7.7
Fabricated metal product manufacturing 72.6% 76.6% 4.0
Non-metallic mineral product manufacturing 72.8% 75.8% 3.0
Primary metal manufacturing 79.5% 75.6% -3.9
Electrical equipment, appliance and component manufacturing 73.6% 75.1% 1.5
Clothing manufacturing 72.8% 73.5% 0.7
Printing and related support activities 69.3% 71.2% 1.9
Tobacco manufacturing 62.1% 60.3% -1.8
Data source: Statistics Canada Cansim Table 028-0002
Table: ConstructConnect.

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