Street-Level Warning: 42,000 Lost Jobs Signal More Than a 'Stall'
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While economists point to a steady unemployment rate, the sudden loss of thousands of positions and cooling wages suggest a harder landing for Bay Street's small businesses.
OPINION: The suits in the high-rises might call it a 'stall,' but for those of us operating at street level on Bay Street, the latest data looks more like a leak that's starting to spray. When you're running a shop, you don't care if the unemployment rate is 'steady'—you care about whether the payroll is shrinking and if the customers are still spending.
As CityNews Toronto first reported, Statistics Canada revealed on Friday that the Canadian economy shed 42,000 jobs in August. This is a jarring reversal from a hot streak that saw 181,000 positions added between April and July. Even more concerning is that this result completely missed the mark for economists, who had expected a gain of 15,000 jobs.
While some analysts are trying to play this down, the details tell a grimmer story for the local economy:
* **The Public Sector Bleed:** Statistics Canada noted that the public sector lost 20,000 positions in August, marking its third consecutive month of losses. The heaviest hits were felt in public administration, natural resources, utilities, and the business, building, and other support services sector. * **Wage Erosion:** For the first time since November 2017, annual average hourly wage increases have cooled, dropping to 2 per cent in August from 2.8 per cent in July and 3.3 per cent in June. * **Youth Instability:** Young workers aged 15 to 24 bore a significant brunt of the downturn, facing 19,000 job losses in August alone.
There is a disconnect between the boardroom and the sidewalk. Andrew Hencic, a senior economist at TD Bank, suggested in a client note that one month of soft data shouldn't define the market, arguing that the steady unemployment rate of 6.4 per cent is the more critical metric.
But the headwinds are real. CityNews Toronto reports that the U.S. applied new 50 per cent tariffs on roughly $28 billion of Canadian goods mid-month. While the manufacturing sector saw a surprise gain of 22,000 jobs in August, Statistics Canada warned that the August figures only partially reflect the impact of these tariffs. Furthermore, the layoff rate for industries dependent on U.S. export demand has been marginally higher over the last year compared to other sectors.
From the central bank's perspective, the outlook is clouded. Governor Tiff Macklem stated that while the economy showed signs of rebound before the trade war re-escalated, the Bank of Canada remains concerned about inflation risks linked to the war in Iran. Consequently, the Bank kept its benchmark interest rate steady at 2.25 per cent earlier this week.
For those of us watching the foot traffic, the warning signs are flashing. Andrew Grantham, a senior economist at CIBC, noted in a client memo that these weak job numbers reinforce the idea that growth will slow in the third quarter, mirroring soft data in GDP and exports. Grantham suggested the Bank of Canada will likely remain on hold due to the uncertainty surrounding U.S. trade.