Improving economy may not translate into lower jobless rate just yet, TD says

Canada's jobless rate is likely to inch higher, despite signs of improvement in the economy, TD Bank says.

Economists at the bank said in a report this week that Canada's job market is moving in two speeds, with regions dependent on energy and other commodities struggling, while provinces with strong manufacturing and other export-driven sectors poised to do well thanks to the cheap dollar.

TD singles out three provinces — Ontario, Quebec and British Columbia — as a source of strength for the economy, forecasting growth of between 2.3 and 2.4 per cent this year.

That's showing up in the job numbers for those provinces too. According to Statistics Canada, over the past 12 months:

  • Ontario has created 74,000 jobs.
  • British Columbia has created 68,000.
  • Quebec has created 16,600.

All other provinces have either lost jobs or held flat over that time frame.

The latest Statistics Canada numbers showed the economy had its best month in more than two years in January, growing by 0.6 per cent and capping off a four-month streak of growth since a brief contraction last September.

Job numbers are not a leading indicator, and typically lag GDP data by one or two quarters. So an improving underlying economy wouldn't necessarily translate into job gains — yet.

And when it happens, it's not going to happen evenly across the country, TD says.

Oil shock absorber

The good news is that labour markets in hard-hit provinces like Saskatchewan and Alberta are in general younger and more mobile than the rest of the country. People there are more willing and able to move where the work is.

"The last time the economic divergence between the rest of Canada and resource-rich economies was this wide, in the 1980s, Alberta and Saskatchewan recorded a combined annual outflow of between 20,000 and 40,000 interprovincial migrants," TD said.

The numbers show that's exactly what happened in the latter half of 2015, and "interprovincial out migration is expected to accelerate in the quarters ahead," the bank says.

That surge of job seekers could put pressure on the unemployment rate in the three provinces cranking out jobs at the moment, especially in B.C. But the bank is confident the job market there can absorb it, with the jobless rate staying in a range below 6.4 per cent until the end of next year.

"Eventually, we do think that more and more people will also start to head to Ontario and Québec as manufacturing begins ramping up," the report says.

The bank expects Ontario's jobless rate to stay steady at 6.9 per cent this year and next, while Quebec's is forecast to drop to 7.5 per cent next year.

Alberta's unemployment figure, meanwhile, is expected to peak at 8.2 per cent this year.

The shock absorber of having a mobile workforce that can go where the jobs are will act as a "cap on how high the unemployment rate will get in oil-torn provinces, but also a floor under the unemployment rate in better performing economies," the bank said.

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