The Canadian labor market seems to have remained significantly well in Donald Trump’s tariff war until now, with the economy showing a surprise increase in jobs in June and the unemployment rate was reduced.
“It seems too good to be true,” said Andrew Grantham, a senior economist at Canadian Imperial Bank of Commerce, in a report this week. “Unfortunately, that’s probably because it is.”
Grantham argues that the labor market is probably weaker than “announced” in the Statistics Canada labor market survey and that the Bank of Canada is obtaining an incorrect reading. What is really happening in the Canadian labor market is that the weakness is widespread and largely not related to the struggles of the industries affected by Trump’s commercial war.
“The notion that the Canadian labor market is in good health, apart from the understandable weakness in areas sensitive to trade, such as manufacturing, is too simplistic and probably incorrect,” he said.
“The real growth of employment during the past year may have been much slower than announced by the LFS, even in sectors that should be less sensitive to commercial uncertainties.”
Grantham argues that the labor market survey has exaggerated population growth and that could lead to employment growth being reviewed at a fraction of what is currently reported.
“We suspect that the real growth of the population, and by the use of extension, has been weaker than the announced by the LFS,” he said.
The Canadian unemployment rate has increased from 6.6 percent to 6.9 percent this year and Grantham said it is easy to assume that the loss of manufacturing jobs caused by the tariff war promoted the increase. But observing the data more deeply, “only 20 percent of the decrease in employment in manufacturing seems to have reflected in the unemployment rate.”
Some workers in this sector could have retired, temporarily left the workforce or found work in other sectors.
This has data that suggests the true reason for the increase in the unemployment rate during the past year is not that people who lose their work, but that people enter the workforce have difficulty finding work, he said.
Ontario, which has suffered the greatest increase in unemployment, reinforces this case. The jumps in the unemployment rate in industrial cities such as Windsor and Oshawa represented only a fraction of the promotion throughout the province, he said. While the Great Toronto, with its diverse economy, contributed to approximately half.
The idea that the weakness of the labor market is more widespread than the informed is backed by the “position” seen in the Employment Survey (SEPH) during the last year, Grantham said.
Obtaining a clear image of what is really happening in the labor market is important because the Bank of Canada has used the use of the force survey in the workforce to justify interest rates of maintaining 2.75 percent, he said.
“If the Canadian labor market is weaker than announced, this slack should eventually exert down the central inflation measures and bring a couple of more interest -rate cuts from the Canada bank at the end of this year.”
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The clock is marking until the deadline of tariffs of the president of the United States on Friday, without still news about an agreement for Canada. Today’s table shows how the country’s rate rate is located against other countries, some that have reached agreements and others that do not.
Until now, Trump’s commercial agreements “are really bad omens for Canada,” said William Pellerin, a trade lawyer and partner of the McMillan LLP firm, to The Canadian Press.
“(Shows) that tariffs, particularly sector tariffs, are more sticky than we would have thought,” Pellerin said. “If none of those countries could ensure a drop in sectoral tariffs, that is certainly bad news.”
Tariffs on Canadian imports will increase to 35 percent on Friday, but most will not be affected because they comply with the Canadian-Mexico State-State Agreement.
- Today’s data: Canada’s GDP for May, income and personal expenses of the United States
- Earnings: Bombardier Inc., Lightspeed Commerce Inc., Cenovus Energy Inc., TMX Group Ltd., Gildan Activewear Inc., Colliers International Group, Eldorado Gold Corp., Aecon Group Inc., Baytex Energy Corp.
- Bank of Canada has a rate of 2.75%, but leaves the door open for greater relief of the rate
- Toronto Condo Glut forces more owners to attract tenants with incentives such as free rent, says Urbanation
- Canada compromises funds for a joint security effort with the United Kingdom
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Today’s position was written by Pamela Heaven with additional reports of Financial Post, Canadian Press and Bloomberg.
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