Canada’s economy continues to stall despite employment gains
Canada’s economy continues to show signs of weakening, stoking concerns the nation is falling into a recession.
Monthly GDP data released on Oct. 30 showed that economic activity stalled again in August and September with little change in output — which has been the pattern since February. Over the past eight months, Canada’s economy has shown no growth at all — a sign of real underlying weakness especially given fast population growth should be driving much stronger increases in activity.
Statistics Canada will release quarterly GDP at the end of this month. There’s a real chance the data will show a contraction for a second straight quarter — which would meet the definition of a technical recession. Canada’s economy contracted by an annualized 0.2 per cent rate in the second quarter, according to preliminary data released by Statistics Canada two months ago.
These technical recessions are usually good indicators of a real recession but the two are not synonymous.
The C.D. Howe Institute, which tracks and labels business cycles, looks for more pronounced and persistent declines in aggregate economic activity before characterizing a downturn as a recession. Downturns need to be widespread and deep in order to get that classification. The data right now suggest that we’re still not there.
Statistics Canada on Friday reported the economy added another 18,000 jobs in October, adding to what is looking like a stellar year for employment. While GDP has stalled over the past eight months, the nation has added more than 400,000 workers so far this year — making 2023 one of the strongest years ever for employment gains.
Employment was up in construction (with 23,000 more jobs, up 1.5 per cent) and information, culture and recreation (21,000 more jobs, up 2.5 per cent) in October. On a year-over-year basis, employment in this industry, which includes telecommunications carriers, broadcasting providers and amusement and recreation, was up by 7.8 per cent (61,000 jobs added) in October, outpacing growth across all industries. Employment in the industry began an upward trend in the fall of 2022 and reached a record-high level in May 2023.
The new jobs added were offset, however, by decreases in wholesale and retail trade and manufacturing.
Employment increased in Alberta, Saskatchewan, Nova Scotia and New Brunswick last month, but declined in Quebec and stayed much the same in the other provinces.
That labour market strength, however, is slowing and new jobs are increasing at a slower pace, so things are weakening. Canada’s unemployment rate rose last month to 5.7 per cent, the highest since January 2022.
The jobless rate continues to rise for young Canadians. StatsCan reported that the unemployment rate among youth aged 15 to 24 years increased by 0.9 percentage points in October to reach 11.4 per cent. From March to October, the unemployment rate rose by 2.7 percentage points among female youth and by 1.8 percentage points among male youth.
But the jobless rate is still considerably below historical averages. Canada’s unemployment rate has averaged seven per cent over the past two decades.
That’s not consistent with an economy in a recession. Things could change quickly, however.
