Canada’s loss of 25,000 jobs not as bad as it looks, economist explains

Earl Davis, head of fixed income and money markets at BMO Global Asset Management, joins BNN Bloomberg to discuss the jobs data and fixed income.

A drop in jobs for the month of January is less severe than it appears, as more full-time jobs were created overall, an economist says.

This comes after Statistics Canada’s Labour Force Survey showed the economy lost 25,000 jobs in January, as fewer people looked for work. The unemployment rate fell 0.3 percentage points from the month before to 6.5 per cent.

• Canada lost 25,000 jobs, unemployment rate down to 6.5% in January: StatCan

The report shows the job losses mostly came from the private sector and part-time work.

“When you break down the number, it’s not as clear,” Earl Davis, head of fixed income and money markets at BMO Global Asset Management, told BNN Bloomberg.

He explains the 25,000 figure is made up of two parts. While 70,000 part-time jobs were lost, 45,000 full-time jobs were added.

“And by definition, the full time jobs are people employed throughout the year, when part-time jobs include seasonal jobs - Christmas sales workers and the like,” said Davis.

“So the split of 45,000 full-time jobs being created is very good.”

He said the reasons many people stopped looking for work could be anything from frustrated job seekers to workers returning to school to develop new skills.

How the Bank of Canada will look at it

The Bank of Canada will see the job numbers as a positive result, Davis said.

He explained that the 6.5 per cent unemployment rate shows employment conditions are improving and reduces the central bank’s likelihood of cutting its key interest rate.

“The reason why it dropped was not because of the increased job creation, but because less people are looking for work,” said Davis, adding that the Bank of Canada will also look at wage inflation, which came in lower than expected at 3.3 per cent.

“The Bank of Canada will like that. They want to see lower inflation that increases the chances of an ease,” said Davis.

He said the Bank of Canada still has flexibility to cut its key rate later in the year, which could be influenced by U.S. unemployment data next week.

“We’re also very constructive on the U.S. market,” said Davis.

Davis highlighted that U.S. tax receipts for the month of January showed a US$60 billion surplus.

“That just speaks to the underlying strength of the U.S. And you know what, despite the uncertainty of what the U.S. does, we will do all right,” said Davis.

Manufacturing sector dependent on CUSMA

Canada is unlikely to see growth in its manufacturing sector until the Canada-U.S.-Mexico-Agreement (CUSMA) is renegotiated later this year, said Davis.

The report said the manufacturing sector lost 28,000 jobs in January and a total of 51,000 jobs over the past year, before U.S. tariffs took effect.

“There’s no medium or large size companies investing in manufacturing plants right now because they do not know the rules or economics of the investment,” said Davis.

“So until we get some clarity there, we expect to see, let’s call it malaise in the manufacturing jobs.”