Scotiabank Says Bank of Canada Is Likely to Discount July's Jobs, Emphasize Accelerating Wages

Scotiabank said that Friday's Labour Force Survey (LFS) disappointed but it thought the Bank of Canada (BoC) was likely to pay more attention to wages as they fed into the dominant concerns around inflation.



Friday's 31,000 drop in total employment appeared to be an Ontario report. Ontario saw a 27,000 decline in employment which dominated the overall national decline. That said, the rest of Canada didn't exactly blow out the lights as all other provinces saw either small gains or small losses.


Canadian employment remained about 423,000 above pre-pandemic levels. That continued to be a stronger cumulative employment recovery than experienced so far in the United States.



Like the acceleration in the US, the BoC will probably put more emphasis on wages and won't be overly fussed by a couple of soft jobs reports since like it or not the point of the exercise was to cool things down, stated Scotiabank. Wages were up by 8.2% m/m seasonally adjusted annual return (SAAR) in July after 11.4% in June and 10.4% in May.

After a brief soft patch from February to April, explosive wage gains had returned and were in keeping with what the bank was seeing from last July to January and then some.

As evidence that at least some of the weakness in jobs might be due to the seventh wave of pandemic cases, the participation rate fell two-tenths to 64.7% and had been falling from 65.4% in March.


As further evidence of this point, the so-called 'she-cession' might have struck the data again. Women over 25 years of age incurred a 64,000 drop in jobs while men went up 30,000 and youths 15-24 were flat (+3, 000). The hit to women was spread between the 25-54 age cohort (-31, 000) and the over 55 cohort (-33, 000).

Hours worked fell by 0.5% m/m seasonally adjusted in July after the 1.3% surge in June. That left Scotiabank tracking a mild quarterly annualized gain in Q3 so far that was entirely driven by the way Q2 ended and averaged.

Behind the health care drop, Statistics Canada flagged that there are about 24,000 unfilled nursing positions in Canada and that 11.2% of nurses who were employed were off sick in July into the seventh wave. US health care employment was nevertheless up strongly last month.

About one-in-four Canadian workers continue to work most of their hours from home, added Scotiabank.

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