Canadian Labour Congress

Canadian Labour Congress

July 06, 2007 09:26 ET

CLC: Job Market Fundamentals Remain Soft

Bank of Canada Should Not Raise Rates

OTTAWA, ONTARIO--(Marketwire - July 6, 2007) - Statistics Canada's Labour Force Survey for June shows that all newcomers to the job market are not finding jobs, the manufacturing sector that usually offer good salaries and conditions continues to lose jobs (31,000 jobs lost last month) while the retail and wholesale sector where, so often, working conditions are precarious created 88.5% of the new jobs last month. "These features of the job market will not create hope and confidence in Canadian households," says Ken Georgetti, president of the Canadian Labour Congress. "Indeed, the job market fundamentals remain soft, which largely explains why, in an apparently low unemployment situation, real wages fail to rise because employers have no difficulty finding workers." - (Check below for the detailed analysis of the Canadian Labour Congress' Economist Erin Weir).

"I, most strongly, renew the call I made last week to the governor of the Bank of Canada, Mr. David Dodge, not to raise interest rates. Higher rates would have a crippling effect in the sectors that provide good jobs with good wages."

The unemployment numbers - The manufacturing sector lost 31,000 jobs while more people entered the job market in June 2007. These two factors kept the unemployment rate at 6.1% despite the creation of 35,000 new jobs. Of these 31,000 jobs were in retail and wholesale, in other words, 88.5% of the jobs created in June. Last month, the number of Canadians who wanted to work but did not have a job stood at 1,086,500.

Economist Erin Weir's Analysis

Manufacturing Crisis Deepens

- The loss of a further 31,000 manufacturing jobs in June pushed total manufacturing employment losses to 95,000 positions since the beginning of February 2007. Since employment in Canadian manufacturing peaked in November 2002, this sector has lost 308,000 jobs.

- Overall, goods-producing industries lost 38,000 jobs in June.

Employment Quality

- Some commentators will point to the creation of 35,000 jobs as evidence of a robust labour market. However, 31,000 of these jobs were in retail and wholesale sector. In June 2007, sales and service occupations paid an average hourly wage of $13.61, compared to an economy-wide average of $20.25.

- Although full-time employment increased nationwide, it declined in Newfoundland and Labrador, Prince Edward Island, and Nova Scotia. British Columbia alone lost 32,000 full-time jobs in June.

Implications for the Bank of Canada

- Some commentators have argued that, due to Canada's "tight labour market," the Bank of Canada should raise interest rates on July 10 to quell inflation. However, Canada's labour market is anything but tight. In June, unemployment grew at a faster rate than employment. Relatively well-paid jobs in goods-producing industries were replaced by less-good jobs in service industries. Real wages have been rising by no more than 1% per year.

- Furthermore, inflation is running at an annual rate of 2.2%, well within the Bank of Canada's target range of 1%-3%. Even in Alberta, the only province with appreciable inflation, the provincial government has declared its opposition to a rate hike.

- The main consequence of higher interest rates would be to aggravate the manufacturing crisis by making investment costlier and by fuelling excessively high exchange rates. The Bank of Canada should not eliminate more good jobs to counter a nonexistent inflation threat.

Construction and Resource Employment Falls

- In June, CIBC and Export Development Canada released commentaries that downplayed the manufacturing crisis by arguing that a surge in construction and natural-resource employment was largely replacing lost manufacturing jobs. The Canadian Labour Congress responded with a reminder that both sectors are quite volatile and cyclical. Indeed, today's Labour Force Survey reveals that the construction and resource sectors lost 2,000 and 7,000 positions respectively in June. In other words, Canadians cannot rely on construction and resource extraction to compensate for the underlying loss of stable manufacturing jobs.

The Canadian Labour Congress, the national voice of the labour movement, represents 3.2 million Canadian workers. The CLC brings together Canada's national and international unions along with the provincial and territorial federations of labour and 136 district labour councils.

Contact Information

  • Canadian Labour Congress
    Jean Wolff, Communications
    Canadian Labour Congress
    Erin Weir, Economist