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Canadian job creation is at worst since 2009 recession, payroll survey suggests

Employers created an average of 11,000 new jobs a month for the first five months of the year, according to Statistics Canada’s Survey of Employment, Payrolls and Hours (SEPH) for May, released on Thursday.

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Canadian employers are not on a wild hiring spree after all, according to new data.

Employers created an average of 11,000 new jobs a month for the first five months of the year, according to Statistics Canada's Survey of Employment, Payrolls and Hours (SEPH) for May, released on Thursday.

The weak jobs data suggest that "paid employment creation so far this year is the worst since the 2009 recession," said Krishen Rangasamy, senior economist with National Bank of Canada.

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The payroll survey results stand in sharp contrast to Statscan's other labour report, the Labour Force Survey (LFS), which has exceeded expectations for months and paints a much rosier picture of the country's job market. The difference in the numbers reported by the two employment surveys is not unusual because the SEPH report is based on payroll data from Canada Revenue Agency, while the LFS relies on people providing information about their wages and job status to data collectors. The SEPH numbers are considered more reliable; the labour force survey is volatile and not as dependable given that it has a huge margin of error.

The LFS reported employers adding an average of 21,000 new positions a month in the first five months of the year. That is nearly double the number of new jobs that the payrolls survey has reported.

Mr. Rangasamy said this could be a statistical correction given the payrolls survey outperformed the LFS from 2013 to 2015.

"The truth is probably something in between. Maybe things are not as great as what the LFS is saying but then maybe things are not as bad as what the SEPH is saying," he said.

Over the longer term, both reports show similar movements in job creation. "The trends are very similar," Statscan analyst Dylan Saunders said.

The LFS has reported torrid job creation for months. The most recent survey for June had the highest year-over-year job growth since oil prices soared in 2013. As well, the employment rate for prime-age workers – those between the ages of 25 and 54 – neared a record high.

Strong economic data along with a bullish business outlook had laid the groundwork for the Bank of Canada to raise the benchmark interest rate for the first time in seven years. In announcing the rate increase in July, the central bank had cited strong business sentiment, particularly for investment and hiring intentions.

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The Bank of Canada also indicated it would remain dependent on data for future action and said one key sign of progress would be wage growth – which has been tepid for months and below historical norms of around 3 per cent and 4 per cent.

The payrolls survey showed the average weekly wage increased 2 per cent to $972 in May over last year. Excluding overtime earnings, the average weekly wage rose by 1.7 per cent to $946.64.

The loss of high-paying energy jobs is partly responsible for weakening the country's average. But other factors are at play, including an increase in the number of low-paid positions in areas such as accommodation, food services, transportation and warehousing.

Higher-paid industries such as professional, scientific and technical services made big wage gains in May, while lower-paid jobs in the retail trade suffered a pay cut.

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About the Author
Economics Reporter

Rachelle Younglai is The Globe and Mail's economics reporter. More

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