- High-Paying Jobs Down 50,000 Over Past Year
- Trudeau May Need To Spend More Than Planned To Boost Economy
- Another Interest Rate Cut In April?
Canada’s unemployment rate will rise to 7.5 per cent next year as the slump in energy investment and hiring continues, and Prime Minister Trudeau will likely have to expand his stimulus spending plans to deal with a slowing economy, Capital Economics says.
A report released this week dug into StatsCan’s data on employment, payrolls and hours and found a disturbing trend: Even though overall employment is up marginally over the past year, the number of high-paying jobs has been shrinking.
The economy suffered a loss in the past year of nearly 50,000 jobs the report defined as high-paying, while the number of low-paying jobs increased by a similar amount.
This chart from Capital Economics shows the change in the number of high-paying jobs has turned negative in Canada over the past year, the first time it has done that since the Great Recession.
Economist David Madani links that to the fact that job growth in Canada has virtually stalled in the “prime working age” group aged 25 to 54. This group has seen virtually no job growth over the past year, Madani said, and “prime age workers are often the highest paid.”
StatsCan’s latest labour force survey showed a surge of 44,000 jobs in October, and the jobless rate dropped a tenth of a percentage point, to 7 per cent.
But StatsCan noted that, over the past year, virtually all the increase in jobs has come from government hiring (up 2.7 per cent), while private-sector jobs have stayed largely flat (up 0.3 per cent).
With the job market under pressure, Madani expects inflation to cool, prompting the Bank of Canada to cut interest rates for a third time since the start of this year. He expects the bank to move on rates in April.
He welcomes Prime Minister Trudeau’s plan to boost government spending (and the deficit) by $10 billion to stimulate the economy, but notes that it “may take some time” for the plan to have a noticeable effect on the economy.
And he thinks Trudeau may have to spend more than that to jump-start the economy.
“The new Liberal government will begin with a relatively small net fiscal loosening, but we suspect that will eventually need to be expanded,” he wrote last month.
Madani is famously bearish on Canada’s economy, largely due to high household debt levels, which he believes will lead to a financial reckoning for the economy, sooner or later.
“Although the mild recession in the first half of this year has ended, the drag from falling business investment triggered by the slump in oil prices is far from over and growing imbalances in the housing market threaten to topple the economy,” he wrote last week.
Also on HuffPost